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National Renewable Electricity Standard: Why raise electricity prices?

 

At the end of last year, representatives Jared Polis (D Colorado), Ben Ray Luján (D New Mexico), and Ann Kuster (D New Hampshire) introduced the National Renewable Electricity Act of 2013 (RES Act), into the US House of Representatives. The act mandates that all US retail electrical suppliers buy an increasing amount of electricity from renewable energy sources, or pay fines for the shortfall. But if the law is passed, it will raise electricity prices for Americans for questionable environmental gains.

The act calls for solar, wind, biomass, geothermal, and other renewables to provide 6 percent of US electricity in 2014, rising to 25 percent by the year 2025. Representative Kuster says, “This common-sense bill will help create good middle class jobs, cut pollution and reduce our dependence on foreign oil—all while saving consumers money on their utilities.” Unfortunately, Ms. Kuster’s statement is not supported by actual industry experience and economic data.

Forcing consumers to buy a product that is more expensive, like renewable energy, never saves them money. A prime example is the recently completed California Valley Solar Ranch in San Luis Obispo County that was constructed under the 33 percent renewables mandate of California’s Renewable Portfolio Standards (RPS) law. The solar ranch covers a huge area of 1,500 acres, more than 100 times the area of a typical natural gas-fired power plant, but produces an average output of only about 55 megawatts, less than one-tenth the output of a typical gas-fired plant, at the exorbitant price of $1.6 billion.

Consumers pay twice for the California Valley Solar Ranch. Electricity from the ranch will be priced at 15 to 18 cents per kilowatt-hour, four times the price of current California wholesale electricity and over 50 percent more than projected prices during the next 25-years. Consumer taxes also paid for a tax subsidy package totaling $1.4 billion, including a 30 percent federal investment tax credit worth $462 million, a $1.2 billion US Department of Energy loan guarantee worth $205 million, and other tax benefits.

Representative Kuster’s comments about reducing “our dependence on foreign oil” are nonsense. Today only 0.7 percent of US electricity comes from petroleum. Claiming that a national renewable electricity standard will reduce foreign oil imports is about accurate as claiming that it will promote world peace.

Politicians repeatedly state that subsidies and mandates for renewable energy will produce “green jobs.” But the Beacon Hill Institute developed more than ten studies on the impacts of state RPS laws, including Colorado and New Mexico, the home states of Representatives Polis and Luján. In all cases, the implementation of RPS laws was found to increase electricity prices, reduce real disposable income, reduce investment, and cause a net reduction in jobs.

Today, 29 states follow renewable portfolio standards laws and another 8 states pursue renewables goals for electricity. The sponsors of the RES Act want to force mandates on the remaining 13 states, the only states with a sensible energy policy. Note that in 2012, citizens in states without RPS mandates paid 10.7 cents per kw-hr for residential electricity, about 19 percent less than the 12.7 cents per kw-hr paid by citizens in states with RPS laws or goals. Higher electricity prices disproportionately impact the poor, as a larger part of their family budget.

Neither is a reduction in pollution a good reason for a national renewables standard. According to Environmental Protection Agency data, all real air pollutants, including lead, ozone, nitrous oxides, sulfur oxides, and carbon particulates have been falling for more than 40 years and continue to decline. US air pollution levels have fallen an aggregate 72 percent since 1970. At the same time, US electricity production from coal is up 115 percent and production from natural gas is up 230 percent.

The unmentioned reason for the RES Act is to reduce emissions of carbon dioxide, the greenhouse gas blamed for man-made global warming. But carbon dioxide, a harmless, invisible gas that trees use for photosynthesis, has been wrongly labeled a pollutant. By forcing the construction of expensive wind and solar plants, proponents of the theory of dangerous climate change believe that they can save polar bears, reduce the strength of storms, curb droughts and floods, and probably promote world peace.

But RPS laws don’t even reduce emissions of carbon dioxide. Installation of wind systems creates stop-and-go electrical utilities. Output from wind turbines is erratic, forcing back-up coal and natural gas plants to inefficiently ramp power up and down to maintain continuity of electricity supply. Studies of utilities in Netherlands and Colorado show that combined wind and hydrocarbon systems use more fuel and emit more CO2 than stand-alone hydrocarbon-fired plants.

Rather than enacting a national renewable electricity law, we should instead roll back our costly state RPS laws. Suppose we return to energy policy based on economics and common-sense, rather than global warming ideology?

Steve Goreham is Executive Director of the Climate Science Coalition of America and author of the bookThe Mad, Mad, Mad World of Climatism:  Mankind and Climate Change Mania.

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A superb article. If you want more or the same and read a Little German, just follow what is going on in Germany. Yes, I can buy a program with as much renewables as possible, and as Little nuclear, - taking into consideration cost in the most comprehensive sense - but what is going on in Germany is verrüct (crazy).

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Still no comments. What's gone wrong? There were no comments for the last article of mine, but I can understand that. People are problably tired of my bragging about failing math and physics and being expelled from engineering school and later infantry leadership school. At a party last night I added getting fired from Hughes Aircraft to that resumé. Hmm.

But this article is the real deal. Under no circumstances do I feel that we should give up on renewable Resources, but the truth is that up to now they have not delivered the goods. The frustrating thing is the insistance that they have got a lot to offer in the here and now, and in addition...

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You may wish to see the very brief paper on the justification for the state and national renewable standards at: https://drive.google.com/file/d/0B1CU9efRPTEycWtuSnBVWk8zZVE/edit?usp=sh...

Maybe more importantly, some of the technologies we take for granted today had long, difficult, costly and subsidized histories. My EnergyCentral article on "The Gas Turbine Diatribe" can be found at: http://www.energycentral.com/generationstorage/fossilandbiomass/articles...

You may not agree, but so be it.

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Mr. Goreham,

I need to comment on several items in your article.

First of all, the $1.6 billion cost for a 55 MW plant seems pretty farfetched and implies an overnight cost of $32,000/kW, or about 4-5 times the cost of much more expensive solar thermal technology. Even at the advertised 250 MW peak capacity, $1.6 billion is more than $6400/kW. The reference you cite talks about $319 million in local economic benefits, which suggests the plant cost is probably a lot less than $1.6 billion and in fact might be closer to half that amount or less. Still a lot of money, but not quite so incredible.

Second, while it's true that the air is cleaner today than it was more than 25 years ago, it's because the Federal government imposed stricter emissions regulations over the vigorous objections of utilities and coal interests. Those regulations likely raised the cost of electricity, but our economy seems to have absorbed the additional costs without lasting damage.

Third, while CO2 is both essential for life and harmless in many respects, I cannot agree that increasing concentrations of CO2 have no long-term impact on global temperatures. Tom Murphy explains why your claims to the contrary are suspect, if not downright wrong, here: http://oilprice.com/The-Environment/Global-Warming/Is-Climate-Change-Rea....

The one thing we can agree on is that a renewable portfolio standard is probably the wrong way to limit CO2 emissions. Some form of cap-and-trade system or a tax on carbon are better alternatives that are less costly and less economically disruptive.

Like Dr. Banks, I'm skeptical that renewables can meet the entire electrical demands of modern society, and like Dr. Banks, I think the path forward has to comprise a variety of resources, including renewables, nuclear and some gas-fired generation. Coal is another story. It's nasty, dangerous to mine, dangerous to burn, and it leave behind all kinds of nasty residue. For the time being, as far as I'm concerned the only clean coal is coal that stays in the ground.

Jack Ellis, Tahoe City, CA

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RPS is unquestionably a ruse for industries that are unable to compete. Adding insult to injury, power generation facilities are added to the grid that does not need the power and must further compensate for the erratic nature of renewable. All this equals needless costs foisted on the hapless consumer.

If the unscrupulous "welfare queens" in the "green" movement want to deploy their machines, kindly stop forcing everybody to empty their wallets to support the exercise. Please note, there is already a mechanism for selling erratic power into the market. However, the "greens" do not like the price, hence the use of extortion.

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The welfare began in 1898 when Samuel Insull began petitioning the states to make the electric companies into monopolies because they could not obtain financing from banks in the free market to build larger generators with economies of scale that allowed for much higher efficiencies to lower cost. While it was an affront to many for ignoring the "so called" free market system, it went ahead and made everyone's life better since it overcame the market barriers of high cost that impeded progress. The RPS is nothing more than another tool to overcome market barriers and far less drastic that monopolization.

While I find your comments insulting to a lot of hard working people in renewables, I will refain from name calling and I still suggest you see my brief history on the justification for the state and national renewable standards at: https://drive.google.com/file/d/0B1CU9efRPTEycWtuSnBVWk8zZVE/edit?usp=sh...

Maybe more importantly, some of the technologies you take for granted today had long, difficult, costly and subsidized histories. My EnergyCentral article on "The Gas Turbine Diatribe" can be found at: http://www.energycentral.com/generationstorage/fossilandbiomass/articles...

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Mr. Gordes, a couple of observations. First of all, wind and solar PV have come way up the learning curve and way down the cost curve, so I think it's fair to question whether they still need generous subsidies in rder to continue to thrive. In California, rooftop PV is already competitive with grid power for high use customers. The California Energy Storage Alliance likes to trot out a graphic that purports to show how economies of scale have led to dramatic reductions in the cost of PV modules and wind, but interestingly enough the cost curves for both are leveling out, which suggests they are not going to get much cheaper than they are today.

Second, press releases from AWEA and SEIA that complain about how reducing subsidies will kill growth in the sector imply that these industries have a right to grow larger. That's not a credible claim for any industry.

Third, I think we have to examine the rationales for an RPS. Five California utilities recently published a study that indicates the cost per ton of carbon abatement associated with renewable penetration levels above 33% is on the order of $300-400/ton, while the cap on carbon prices in California's cap-and-trade system is somewhere around $100 if memory serves me correctly. If the end game is a reduction in CO2 emissions, RPS is pretty expensive. In fact, at those levels sequestration starts to look mighty attractive.

Finally, it's instructive to consider whether high levels of penetration would support a modern economy while delivering electricity at reasonable cost. There's an NREL study that says yes and an interesting but unproven idea by Mark Jacobson at Stanford that says yes but the above-mentioned California study and another analysis under the rubric California's Energy Futures say no. My sense is, the barriers that stand in the way of a high RPS path are going to be more about public acceptance of the required infrastructure and the energy security implications of lots of difficult-to-secure transmission.

I'm all in favor of keeping things simple but in this instance, the problem is complex, multi-faceted, and heavily reliant on ideas that are not yet demonstrable viable or practical.

Jack Ellis, Tahoe City, CA

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Joel Seem to me you are confusing supporting development with supporting deployment. Gas turbines received a lot of development assistance and have provided a very good return on the taxpayer investment. The machines provide reasonably priced energy and protect us from our enemies.

Government has supported development of all manner of technologies, which strikes me as reasonable provided there is a reasonable shot at success.

However, the government has now decided to pick the winners and losers in the energy marketplace by directly providing money (e.g. "Feed-in tariffs") or forced coercion (RPS for example). This absolutely invites corruption and unquestionably needlessly drives up the cost of energy. By the way, I do not support the governments recent attempts aid the deployment of Small Modular Reactors either.

While there are undoubtedly a lot of hard working folks in the renewable energy business, the radical left has subverted the effort. That is why we see the prevalence of deliberate distortions and outright lies with the express purpose to deceive, scare and con folks into going along with marginal to simply poor solutions to a problem that does not warrant hysteria. These are the classic techniques of the radical left. Fundamentally, we have a select few trying to tell everybody else what to do while enriching themselves.

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Jack, thank you for your thoughtful comments. Let me attempt to intersperse some replies to your comments in two posts:

You say: Mr. Gordes, a couple of observations. First of all, wind and solar PV have come way up the learning curve and way down the cost curve, so I think it's fair to question whether they still need generous subsidies in rder to continue to thrive. In California, rooftop PV is already competitive with grid power for high use customers. The California Energy Storage Alliance likes to trot out a graphic that purports to show how economies of scale have led to dramatic reductions in the cost of PV modules and wind, but interestingly enough the cost curves for both are leveling out, which suggests they are not going to get much cheaper than they are today.

I reply: California is one state and has been the leader in renewable deployment, particularly PV; but we cannot just look at California except to say they can continues to drive cost down via the huge market pull they exert. Many states lag and have not developed soft cost reductions such as local permitting, single inspections, installation methods that are as cost effective as CA and they certainly DO currently require the buy downs to develop further. Actually,, one aspect which did make them cheaper was beginning sometime around or after about 2009, for the first time, PV manufacturers had a dedicated feedstock of polysilicon which had not existed prior to that. There is also much research, some employing nano technology that hold great promise for further price reductions so don't offhandedly close that door.

Best Regard, Joel N. Gordes

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You say: Second, press releases from AWEA and SEIA that complain about how reducing subsidies will kill growth in the sector imply that these industries have a right to grow larger. That's not a credible claim for any industry.

I respond: Hmmm, first you are, in your own words "implying" this but I don't know about that and it is a subjective judgement at beat. Besides, are we not still supplying our oil company friends with oil depletion allowance 100 years later? When might that end? I also note from my time in the service that when I trained Iranians and delivered an F-4E that we spent upwards of $50 billion per year to be able to intervene in the Middle East--subsidies by an othger name in my book. General Smedley Butler, USMC, would agree.

You say: Third, I think we have to examine the rationales for an RPS. Five California utilities recently published a study that indicates the cost per ton of carbon abatement associated with renewable penetration levels above 33% is on the order of $300-400/ton, while the cap on carbon prices in California's cap-and-trade system is somewhere around $100 if memory serves me correctly. If the end game is a reduction in CO2 emissions, RPS is pretty expensive. In fact, at those levels sequestration starts to look mighty attractive.

I respond: I do not see the main value of renewable being primarily for carbon reduction at this point in their development cycle so we may agree on this for the immediate period. The RPS is to overcome market barriers for technologies and I have gone to one of the actual authors of the RPS to confirm what is in my paper pertaining to that that I provided a URL for. He never mentioned carbon and neither did I.

You say: Finally, it's instructive to consider whether high levels of penetration would support a modern economy while delivering electricity at reasonable cost. There's an NREL study that says yes and an interesting but unproven idea by Mark Jacobson at Stanford that says yes but the above-mentioned California study and another analysis under the rubric California's Energy Futures say no. My sense is, the barriers that stand in the way of a high RPS path are going to be more about public acceptance of the required infrastructure and the energy security implications of lots of difficult-to-secure transmission.

I reply: I wonder what was said of the very early electric industry before Sam Insull was successful in getting power companies made into monopolies. The cost in today's dollars of a kWh was an astounding $6.80/kWh. Obviously that would not support a then-modern economy and so they monopolize the product to reach those economies of scale. BUT I think you have hot the nail on the head when you bring up the word "security" as that is my end game and only through decentralization, using both renewables and fossil driven CHP can we really become more secure against the many threats we face from physical attacks like Metcalf Station in San Jose to cyberattacks to even low probability but ultra high impact coronal mass ejections or electromagnetic pulse weapons. I think the continued growth of transmission, which keeps generation sources distant from end users, is not only expensive but is detrimental to true energy security.

You say: I'm all in favor of keeping things simple but in this instance, the problem is complex, multi-faceted, and heavily reliant on ideas that are not yet demonstrable viable or practical.

I respond: I also think the KISS principle has validity but recognize the complexities--such as the growing complexity of the centralized grid--itself a threat---but I also think we have many examples of unlikely products and methods becoming viable and practical. How often does the term "it was impossible, until it wasn't" apply.

Best Regard, Joel N. Gordes

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"The RPS is to overcome market barriers for technologies..." Yeah, it's not needed and costs too much, so lets force the consumer to shovel money to a select few who are unable to compete.

Energy security??? Try a back-up generator.

There is a reason power generation tends to be from big plants: economies-of-scale makes it more cost effective.

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Sorry Michael, but I have to disagree with a couple of your points. Backup generators are not cheap and neither is the fuel. If I'm going to install a backup generator, I might as well install something that meets all my needs, but that's not cheap or quite or inconspicuous, at least not yet.

The economy of scale argument used to be valid. Today I'm not so sure. I wish I had a copy of the study a colleague of mine at the time performed for what's now Entergy that showed how those big plants actually drove up the need for installed reserves. Those large plants have to be connected by transmission lines that are practically impossible to defend against attack. While many argue that a robust grid provides reliability benefits, I'm coming around to the view that the grid as currently designed and built tends to propagate disturbances rather than helping contain them.

Joel, if you're suggesting a motivation for renewable energy that's unrelated to CO2 emissions, I'm not sure what it is. We have a power grid that functions reasonably well and provides affordable electricity. Renewables have certain environmental advantages over fossil-fired plants and they have certain environmental disadvantages. More importantly, depending on certain renewable technologies to deliver a reliable supply of energy when consumers demand it is expensive and challenging. What am I missing?

Jack Ellis, Tahoe City, CA

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Will get back in more excruciating detail if I have the time later today but the economies of scale which I brought up in the need to monopolize did apply to the Rankin cycle (steam turbines) but the Brayton cycle (gas turbines) aided in breaking that connection.

If you go to https://drive.google.com/folderview?id=0B1CU9efRPTEydlF2M1ZrQ3YweGc&usp=... you will find about 10 two page papers on the various threats to the centralized grid which you are free to access -- or not. Unless we decentralize, we will remain vulnerable to existing and emerging threats. Functioning "reasonably well" is not good enough in a digital society, Jack. Renewables have to be a part of that and there are some that can be base load like biomass as well as seeing new storage technologies using nanotechnology and could be the "Holy Grail" of renewables. Speculative, yes, but so was flying....until we made it so.

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"The act calls for solar, wind, biomass, geothermal, and other renewables to provide 6 percent of US electricity in 2014, rising to 25 percent by the year 2025. Representative Kuster says, “This common-sense bill will help create good middle class jobs, cut pollution and reduce our dependence on foreign oil—all while saving consumers money on their utilities.”"

What makes passing that bill "common-sense"? I have common-sense and can think of nothing to support mandating 6%-25% renewables. If it's a 'jobs bill' then coal, natural gas and nuclear industries provide jobs as well. If it's a pollution control bill, then mandate emmissions and let entrepreneurship determine how to comply. If it's cutting our dependence on foreign trade, well, that's just economically stupid.

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Hmm. I said that this was a superb article, and now I find myself Reading it again. What do I say now? Well, I say exactly the same thing, because at this stage of my Life it tells me what I need to know to get through the day. Let me add that Mandating 6% renewables might be all right, might, but talking about 25% - given what they have delivered so far - is just crazy.

Did I say crazy like a Daisy, well Think about the following. By mid-Century Germany and Japan will probably be the most nuclear intensive countries in the World. Why is that? It's because by that time, when they get a look at the next generation of nuclear Equipment, or the generation after that, they will get the messagel and stop the foolishness.

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"Economies-of-scale" applies to Rankine steam plants. Go back to the 1940's & 1950's where relatively small boilers & turbines were strung together. Larger power plants were subsequently built, not multiple small units, because the larger plants are more economical.

The idea we "need" to decentralize is weak, as the larger plants (particularly the combined-cycle units) are able to reliably provide power as required to meet the needs of the grid. Unreliable renewable energy flips that whole concept on it's head and forces the grid to take power whether it is needed or not. That needlessly drives up costs.

"Functioning "reasonably well" is not good enough in a digital society". That line of logic immediately assigns unreliable renewable energy to the dung heap.

A back-up generator is, by definition used in an emergency, which is a rare event. Renewable energy is unlikely to be of much use in an "emergency", with an extremely high-cost completely out of line with likely need and availability. A diesel back-up generator is much more cost effective, with a high probability of being available when needed.

I wish the proponents of renewable energy would fully apply logic, instead of trotting out the "party-line"

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"Multiple small units". Nice expression Michael. I wonder though if multiple small units wouldn't be useful in a situation like the one in Finland when they were building their new nuclear facility, and had to get help from, France instead of multiple small units being constructed in France and shipped to Finland.

As for decentalization, considering the evidence here in Sweden, that sounds fruitcake to me. Something like Amory Lovins might have dreamed up.

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Guess it boils down to being not too big and not too small, kind of like "Goldie Locks and the Three Bears". Strikes me that between 800 and 1100 Megawatts is about right for a power station, considering economics, material and manufacturing capabilities as well as grid needs.

Did see a rather interesting item in the news about a brand new (2012) and highly efficient (~60%) combined-cycle power plant in the Netherlands being mothballed for economic reasons. The high-priced natural gas from Russia did them in. The best energy choice for Europe is actually coal followed closely by nuclear. Oops, not allowed by the leftist "green-movement", although there are actually a number of new coal plants quietly being built in Europe. The Ruskies are building numbers of nuclear plants, no doubt bank-rolled by the witless Europeans buying their gas.

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Hmmm, I thought all you good, patriotic, right wingers would be much more for totally free markets rather than for centralized systems run by "Godless monopolies" which are the antithesis of what you proclaim to support. Me doth think ye protest too much; sounds a bit "red" to me ;>)

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The fact that only one set of electric wires run into your house creates difficulties in dealing with electric utilities in a normal market sense. Government attempts to inject "competition" and "fairness" inevitably create unintended consequences - the debacle in California is a pretty good example. To my way of thinking, municipal power would be preferred over a private utility, given that a truly open market is not physically possible, unlike say the communications industry. Incidentally, municipal power is generally not heavily under the thumb of the "regulators" and is more directly answerable to the folks.

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I agree with you on the advantages of municipal power as one viable alternative but actually other alternatives exist where many, like Michael, do not think they do. To understand this, the grid must be considered as what is termed a "common pool resource" and what I will provide here refutes one of the most sacred of environmentalist metaphors. The following excerpt of an article by Elinor Ostrom et al from the 4/9/199 issue of Science explains it this way:

"In a seminal paper, Garrett Hardin argued in 1968 that users of a commons are caught in an inevitable process that leads to the destruction of the resources on which they depend. This article discusses new insights about such problems and the conditions most likely to favor sustainable uses of common-pool resources. Some of the most difficult challenges concern the management of large-scale resources that depend on international cooperation, such as fresh water in international basins or large marine ecosystems....

Thirty years have passed since Garrett Hardin's influential article "The Tragedy of the Commons" (1). At first, many people agreed with Hardin's metaphor that the users of a commons are caught in an inevitable process that leads to the destruction of the very resource on which they depend. The "rational" user of a commons, Hardin argued, makes demands on a resource until the expected benefits of his or her actions equal the expected costs. Because each user ignores costs imposed on others, individual decisions cumulate to a tragic overuse and the potential destruction of an open-access commons. Hardin's proposed solution was "either socialism or the privatism of free enterprise" (2).

The starkness of Hardin's original statement has been used by many scholars and policy-makers to rationalize central government control of all common-pool resources (3) and to paint a disempowering, pessimistic vision of the human prospect (4). ... Although tragedies have undoubtedly occurred, it is also obvious that for thousands of years people have self-organized to manage common-pool resources, and users often do devise long-term, sustainable institutions for governing these resources (5-7). It is time for a reassessment of the generality of the theory that has grown out of Hardin's original paper. Here, we describe the advances in understanding and managing commons problems that have been made since 1968. We also describe research challenges, especially those related to expanding our understanding of global commons problems."

The article goes on in detail with specific examples on how this has worked well in some instances but if you are familiar wit the Zip Car model of automobile/use ownership it might be one such model. Some others are applying it to the electric grid in such a way that we still have "one st of wires" u t the ownership model is not monopolistic or owned by"big government" or maybe even by small government. I hope this helps the dialogue develop in a constructive manner rather than just talking heads and little ore than, as Anew put it, nadiring nabobs of negativism". We just have to be smart enough to find the answers awaiting that being stuck in the past ad the many threats to the central grid will necessitate major changes.

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Seems to me the collectivists model invariably degenerates into misery for everyone and facilities/infrastructure in wide disrepair. An ownership stake of some sort is superior.

A good approach is to allow the individual a stake in the enterprise, although not necessarily ownership. I've found over the years that if you give folks the responsibility as well the ability & accountability to manage their part of the effort AND then cut them in on the action (that would be generally more money as profitability rises), then things work out better for everyone. Please note that this philosophy really does not work with government as reducing costs is a complete anathema for bureaucrats and politicians. Nor does it work with corporate management that really has no intention of spreading-the-wealth, preferring instead to keep the vast majority of the profits in their own pockets (as opposed to including shareholders and employees).

PS Under no circumstances would I allow "bonuses" for government bureaucrats, as they have vastly better benefits than the folks.

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Coal followed by nuclear. Germany is dumping nuclear and burning more coal than has been burned in that country is The Wall was up, but nobody expects the price of electricity to go down. Another decade - or maybe two - and once the plant is up and paid for, the price of electricy will be too low to pay metering COSTs.

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