Two weeks ago, it was blogged that Tom Noyes, aka blogger Tommywonk, was taking a job in DNREC in the Markell Administration in the area of alternative energy. In office, the “businessman” Governor has a record of accomplishing two things: 1) Spending taxpayer money on Corporate Welfare for publicly-traded, well-capitalized companies that make big political donations and 2) Promoting policies that keep squeezing Delaware’s small business community. This appointment and its effect on energy prices in Delaware will continue the latter trend.
Let me start by saying that Mr. Noyes is a decent, well-meaning guy. However, watching the enclosed video of Mr. Noyes giving testimony on the Bluewater Wind proposal, you while see the outraged indignation demonstrated only by “true believers” in their particular religion (See late author Michael Crichton’s 3 speeches on Global Warming). And Mr. Noyes is a “true believer” in the religion of man-made global warming, and anyone who disagrees with him is subject to his disdain. (Note: Depending on whose climate model you want to analyze, the number of simultaneous, linear-simplified equations can number over 1,300 with over 1,400 variables. With that kind of complexity, I can give you any answer you want by manipulating those variables. We have seen this manipulation done with the “hockey stick” model as well as the results from East Anglia Climate Research Unit).
The following is a point-by-point critique of Mr. Noyes testimony, which clearly demonstrates that it is his reliance on belief rather than data that really drives his narrow brand of “environmentalism”. At the end of the text, is the original video footage from which the excerpts are taken. The footage is from State Senate public hearings on the Bluewater Wind proposal back in early 2008.
Mr. Chairman, I’m here as an environmentalist with an MBA. I don’t think that there are many of us in the room. And yes, I have looked at the entire record.
I, too, have an MBA. I, too, am an environmentalist. I even have a Computer Science and Physics degree. What really matters is do you, as independently as possible, follow the data or follow your beliefs irrespective of the data.
I am not a “true believer”, which would discount my opinion in Mr. Noyes’s view, but I will hold my record of environmental activism and achievement up against anyone, anytime and publicly.
The PSC’s staff report projects that the Bluewater wind’s offshore wind farm would cost us about $6.46 per month, the so-called “green premium” that some speakers have referred to.
For those interested, the PSC’s staff report can be found here.
The question is compared to what? What assumptions about future energy prices are used in producing those figure. The argument that offshore wind is too expensive is based on unrealistic assumptions that natural gas prices will go down over the next 4 years and remain below current prices for years to come.
At this point, Mr. Noyes shows a copy of a chart from the PSC report. I include the chart below, and I’ve added 5 data points showing actual average natural gas prices to date
I also include the following chart that shows the spot price of Gulf Coast Natural Gas for the last 12 years. the January 1997 price was about $4.00, the most recent price in August 2011? About $4.30.
(source: US Energy Information Administration).
It is clear from the charts that the assumptions made in the PSC report actually UNDERSTATED the depths to which natural gas prices were to decline (or stay flat depending on your point of view). Meaning that the PSC report was much MORE ACCURATE than Mr. Noyes. But, at the time these were just forecasts. Oftentimes, forecasts are off by a bit (sometimes they are off by a lot… like President Obama’s forecast of unemployment after the “stimulus” bill) — a reality that Mr. Noyes chooses to ignore in his following comment…
First, [I don’t blame the PSC because they] based [their report] on the [US] Energy Information Agency and an independent consultant [assumptions]. However, those assumptions are wrong… the US Energy Information Agency has missed the mark previously, 10 year ago [they] predicted that Natural gas prices would remain flat. Instead they tripled.
Mr. Noyes is saying that the PSC forecast is wrong because the US Energy Information Agency once made a wrong forecast TEN YEARS PRIOR. This is a blatant use of data cherry-picking. The US Energy Information Agency has often had very good forecasts as well as some bad ones. So, Mr. Noyes is picking a single data point that supports his position while ignoring dozens of data points that contradict his position.
Furthermore, given Mr. Noyes blatant condemnation of the US Energy Information Agency due to a bad forecast, Mr. Noyes should cease and desist his own efforts in promoting alternative energy since he clearly has made his own incorrect forecast. That would the intellectually honest thing to do.
Second, natural gas futures prices traded on the NYME are going up not down. The price for delivery a year from now is 15% higher than the current price.
True, the futures market was up back in 2007. In 2007, housing prices were up, too. It is called a “bubble”. Most MBA’s have heard about them – often in reference to tulips. In this case, I give the nod to Mr. Noyes. The market signals at the time were for an up market.
Of course, most MBA’s are familiar with portfolio theory — diversification leads to lower volatility. Often referred to as defensive hedging. My position was and remains, if offshore wind energy is a good investment, then let the private sector make that investment, instead of forcing Delmarva ratepayers into an unhedged investment that they are ill-prepared to make.
In addition, if Mr. Noyes was that confident in the market forecasts, he should have spent his time trying to build a private sector consortium of investors to invest instead of trying to force Delmarva’s ratepayers, many on fixed incomes, to invest through a forced rate hike. The same argument can be made regarding the forced investment by Delmarva ratepayers in Bloom Energy (Governor Minner was all about wind, Governor Markell is all about fuel cells, the end result is the same — higher prices for Delaware). Since Mr. Noyes made no public effort to get private investment into the project, I can only surmise that he knows that it is a bad investment, which is why he’s getting a good government job, today.
Third, the International Energy Agency in its most recent world energy outlook projects that overall energy demand including natural gas will increase 55% by the year 2030. Increasing demand – limited supply, you do the math.
Ahhh, “you do the math”. As if it were as easy as “2+2=4”. Well, Natural Gas market participants did do the math, invested, and radically changed the natural gas market by dramatically increasing… SUPPLY. Today, the same agency Mr. Noyes used to defend his position now says:
[T]echnological enhancements to producing natural gas are expected to increase its production to the possible detriment of renewable energy.[i] Natural gas, the least carbon intensive of the fossil fuels, is the only fossil fuel expected to see an increase in demand by 2035 in the IEA forecast. Unconventional sources of natural gas; shale gas, coalbed methane, and tight gas; are expected to make up 35 percent of the increase in natural gas production through 2035, the last year of the IEA forecast. Unconventional natural gas production and an increase in global liquefied natural gas capacity, which is expected to be 47 percent greater by the end of 2013, will keep natural gas prices lower than previously expected, making it a major candidate for new electric generating capacity, competing with other clean sources, nuclear and renewable energy. While the price of natural gas is projected to stay lower than previously forecast, the IEA also estimates that massive subsidies will continue to be needed for renewable energy.
To summarize the International Energy Agency: Increasing demand – increasing supply. Reversing Mr. Noyes position of “Increasing demand – limited supply.” Furthermore, renewables will require MASSIVE subsidies — aka a “Green Premium” that Mr. Noyes baldly refutes.
But let me be clear, I put very little faith in any forecast for 2035 (let alone forecasts for 2012). That is why I believe that risky investments, like offshore wind, should be made by private investors not by “true believers” with an agenda to push. Back to Mr. Noyes’s testimony:
Fourth, natural gas costs are expected to climb further as utilities find it increasingly difficult to build new coal power plants and increasingly must rely on natural gas. Again, increasing demand – limited supply.
This is simply a reiteration of his previous point. But again, supply of natural gas has significantly INCREASED.
As for accessing untapped reserves, they will be tapped when the price goes up to make them cost efficient for the energy companies.
Yes, finally the MBA degree is kicking in!! Only this happened at a time most inconvenient for Mr. Noyes religious views. $8.00 Natural Gas was high enough to drive the necessary technological change. It is called “Fracking”, and even opponents of it agree that there is no proof that fracking causes environmental problems — lots of fear-mongering and innuendo — but no hard data.
The public understands that energy prices are going up and unlikely to come down anytime soon, which is one reason why … public comments have run 10 to 1 in favor of the wind project.
I suspect that, today, the answer to the alternative energy support question would be quite different from the rosy scenarios promulgated in 2007/2008. In the most recent debt ceiling debate, I don’t recall the demands for massive subsidies for alternative energy. That demand for subsidy belief exists only in Delaware, where Governor Markell is putting massive subsidies into Bloom Energy and has helped ensure Delaware’s high energy costs relative to our region.
So, who’s being naïve here? The advocates of wind power? Or the opponents? It would be ironic if the General Assembly killed the offshore wind proposal based on the mistaken assumption that energy markets would somehow work in our favor this time.
Actually, the energy markets did work. Which makes this comment very ironic. Funny & ironic.
I have several questions, I’m just going to mention one: Does this committee expect natural gas prices to go down significantly over the next 4 years?
I had no idea where natural gas prices were going to go, and I don’t know where they are going to go over the next 4 years. That is why I wouldn’t dare to put taxpayer money at risk for a roll of Mr. Noyes’s loaded dice. As a keeper of the “Faith”, Mr. Noyes has no problem spending someone else’s money on his myth.
The General Assembly passed HB 6 in response to the sudden 59% rate hike brought on by electric power deregulation, and yet the argument that the wind farm would cost too much is based on the belief that this time, somehow, the magic of the market will bring about decreases in future energy prices despite what we have learned from experience and in defiance of all we know about economics…
HB 6 was required because the General Assembly did not fully deregulate the power industry during the deregulation actions in 1999. In fact, Delmarva was forced to cap prices for 6 years. HB 6 was passed because the artificial cap on the price of electricity expired at the most economically disadvantaged time in the Bubble economy that was 2005 through 2008. Had the General Assembly deregulated the entire energy market in the late 1990’s, there would not have been a single 59% rate hike shock. Would prices have been higher in 2005, perhaps as much as 59%? Probably, but it wouldn’t have occurred as a single rate jump due to the expiration of a government mandated price cap. Surely Mr. Noyes knew this fact since “he read the entire record”, but chose, for personal philosophical beliefs, to ignore that fact.
Again, the full video of his testimony is below. I’ve hit most of the high points, but his outrage and indignation during the testimony has explanatory powers that my written word fails to match.
In closing, the following is from Mr. Noyes last post on his blog:
Next week I start a job with the State of Delaware in the area of renewable energy. Having argued that renewable energy can and does make economic sense, I want to help make that happen. It’s work worth doing, and worth doing well.
Despite a clear record of being wrong about the energy market for natural gas & offshore wind, Mr. Noyes’s religious-like belief in the theory of man-made global warming drives him on. The record above shows, quite clearly, that Delmarva ratepayer funded or taxpayer funded offshore wind made and makes no sense. It further shows that actual market participants, those with capital at risk, know better how to produce affordable, clean energy than do “MBA-backed environmentalists”. In arguing that renewable energy “makes sense”, Mr Noyes has ignored the evidence that has accumulated over the last three years. What is ironic is that the Markell Administration, which shares his devotion to the alter of alternatives, has brought him into the government fold so that he can do for Bloom Energy what he did for Bluewater Wind.
Renewable energy will make sense when the entrepreneurs and the marketplace make it affordable. It will happen; we just don’t know when. However, by trying to force non-cost-effective solutions onto Delaware’s businesses and consumers, the local economy will continue to lag the region, and our citizens will continue to suffer. Unlike Mr. Noyes’s position, mine is not a position based on faith, but a position based on reality. Check out the State’s Office of Labor and Management Information and see for yourself…