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In this special edition of the Power Line Show, Steve Hayward talks with author Robert Bryce about the new world of global oil prices which has ended, probably forever, OPEC’s 40-year dominance. They also talk about the perverse subsidies for and output from “renewable” energy, and why nuclear power may be poised for a comeback.
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Interesting discussion, especially the discussion of solar and wind subsidies. But doesn’t corruption and inability to stop pervasive government stupidity and organized rent seeking make future energy prices unpredictable? Oil price volatility was more a product of zero marginal costs and high capital costs, than government policy wasn’t it? What are the differences in these factors with fracking?
Very nice summary Mr. I Walton. Energy like banking has become a corruptocracy unto itself to survive. They are front in center as examples why smaller government is best.
Fracking is similar to big oil, but slighting lower in scale. Thus, the incremental capital is lower for incremental production. Fracking also requires refresh and renewal every 18-24 months. Therefore, it can ramp up and down so long as there are frackable substrate formations accessible.
This means, fracking has marginal costs that are higher and upfront costs that are lower. Collection and distribution costs can be higher too due to location, volumes, and dispersal. Note American fracked oil being transported by railroads rather than pipelines.
Thanks, that is what I suspected, so this should ameliorate the volatility to some extent should it not?
Great interview, Steve. It was very informative. Thank you.
I haven’t listened yet. However, I’m in the business, and I’m seeing nuclear power plants closing one after another like dominoes.
It’s my understanding that the reason so many nuke plants are closing is they have reached their end life , some even beyond.
WOW! How did I not know Ricochet had an energy podcast?! Great job. I didn’t know that about the TX RRC.
Thanks!
No. Most plants have applied for and received license extensions. The ones that close do so because they are not making a profit.
OK, now I’ve listened to the podcast, and I agree with almost all of it. I didn’t hear a case made why nuclear power might make a comeback (I am assuming you meant in the USA). The problems mentioned with wind subsidies are spot on.
One criticism: Mr. Bryce points out that wind energy receives a subsidy of $23/MWh or 6.76 per million Btu (using 3.4 million Btu = 1MWh), while natural gas costs $2.70 per million Btu, and therefore the subsidy for the wind industry is 2-1/2 times the market price of natural gas. While true, this is an apples-to-oranges comparison. The problem is that you are comparing marketable electricity with the heating value of a fuel. You cannot convert 3.4 million Btu of heat to 1 MWh of electricity (100% efficiency). In a very efficient combined-cycle gas plant you might be able to hit 40% efficiency in converting heat to electricity. So where Mr. Bryce states that the subsidy for the wind industry is 2-1/2 times the market price of natural gas, this is misleading; the market price of electricity produced from natural gas would be approximately equal to the wind industry subsidy, considering fuel cost alone (which is certainly not the only cost of producing electricity). The case against wind subsidies is strong enough without exaggerating it like this.
Other than that, great info and I look forward to reading the book.
This was really interesting. I had no idea the wind subsidies were so extreme.