Category: energy

Environment or Economy: A Story of Opportunity Cost

Environment or Economy: A Story of Opportunity Cost

The Maine State Legislature recently proposed a bill regarding fossil fuels and environmental policy. The bill would prohibit gas companies from charging consumers in order to finance expansion of gas service mains and gas service lines, effectively serving as a ban on natural gas expansion. The bill would not affect existing service lines.

Yankee Gas, Wilton Gas Expansion Project
Yankee Gas, Wilton Gas Expansion Project” by yankeegasmedia is licensed under CC BY-ND 2.0.

Proponents of this legislation, led by William Harwood, cite a 2019 law requiring the state to reduce greenhouse gas emissions by 45% from 1990 levels by 2030, and 80% by 2050. This will be impossible, they argue, if natural gas continues to expand its presence in the state. Harwood further argues that electric heat pump usage will increase, reducing dependence on natural gas and limiting the damage that would come from halting its expansion.

On the other side are natural gas companies such as Summit Utilities who argue that Maine does not have the tools necessary to replace natural gas and that any move to preemptively do so comes at a cost to consumers. There have also been arguments presented about how the language of the legislation could inhibit energy innovation. Jenni Tilton-Flood, who is working with Summit Utilities to yield renewable energy from manure emissions, stated that “Projects like these can’t happen” if the legislation is enacted because prices will not be able to increase to finance such innovative projects. 

These arguments are not mutually exclusive. Two things can be true at once: halting fossil fuel expansion is likely necessary to hit environmental targets but this will come at an economic cost for ratepayers (at least in the short term) at a time when utility rates are on the rise in Maine. There is a clear opportunity cost present in this choice. The choice comes down to value priorities and differing interpretations on the level of economic harm stemming from the proposed legislation. 

However, these choices and considerations were delayed for a year, and the Maine State Legislature is now considering legislation that would fund a series of studies aiming to identify the role of fossil fuels in the state’s energy future. Proponents of both this proposal and the initial legislation aim to highlight the fact that expanding fossil fuels is incompatible with Maine’s stated energy goals. Ultimately, this decision to delay consideration of legislation halting fossil fuel expansion shows the controversy and strong disagreements stemming from differing value priorities and opportunity costs present with action and inaction. 

If you are interested in this topic, please see the references below for more information.


Works Cited

Singer, S. (2024, January 23). Bill to scale back natural gas in Maine draws strong opposition at public hearing. Press Herald. https://www.pressherald.com/2024/01/23/bill-to-scale-back-natural-gas-in-maine-draws-strong-opposition-at-public-hearing/ 

Are there enough minerals in the world for a total transition to an alternative energy system?

Are there enough minerals in the world for a total transition to an alternative energy system?

There’s an ongoing debate concerning the availability of minerals needed for a full transition to alternative energy sources. This conversation involves factors such as the Earth’s resource capacity, energy return on investment (EROI) for various energy technologies, technological advancements, and the practicality of shifting away from fossil fuels.

Many discussions have raised concerns about the adequacy of critical minerals required for renewable energy technologies like solar panels, wind turbines, and electric vehicle (EV) batteries. These technologies rely on materials such as rare earth elements, lithium, and cobalt, which might not be as abundant as more common resources. However, advancements in technology and improved recycling methods are being considered to address these concerns.

Recently, I have been reading about energy return on investment and energy flows in the current system (Brockway, 2019 and Barnard, 2023). Energy return on energy invested (EROI) is a calculation that experts use to try to answer questions about transitioning the energy system. EROI tells us the proportion of return on investment for producing energy and this can be then compared to the percentage that is used in the system and the investment needed to use it. Unfortunately, some methodologies for calculating EROI focus on the production side and compare energy source to source. These experts claim that since the EROI on oil is so much higher than for renewables, transition would be impossible from a sheer energy perspective. Other experts have begun to look at energy flows through the system, factoring wasted energy into the equation. These experts are saying that renewable energy produces  such little waste that the EROI is comparable with oil after factoring in efficiency (Brockway, 2019). Still others are saying that as the cost of extracting and processing the finite resource rises the transition to renewables is inevitable (Barnard 2023). 

A diagram of a energy consumption

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Energy is often viewed as the economy is, as a supply and demand equation. After all, the economy is largely a story of energy inputs and outputs. On the supply side, people pay for energy produced and delivered with utilities accounts. This view is loaded with assumptions and hides energy waste out of view entirely. As a result, consumers pay for the lost 65% of energy generated in the delivery fees along with grid maintenance costs!With the supply side getting most of the attention we can easily stop imagining a brighter future with a thriving economy for our descendants.

However, the demand side of the equation is simply the wattage hours, rather than the cost of wattage hour. The wattage hours metered, the gallons pumped, or cordage dropped represents the demand side of the equation. A recent article by Micheal Barnard, for example, says that, “The primary energy fallacy is the assumption that all the energy, in all of the oil, gas and coal that we burn today must be replaced. We don’t need to replace it, we need to replace the unwasted energy services.” (Barnard, 2023). And that is less by a factor of two-thirds! Viewing it from this perspective suddenly seems much more doable.

The technologies are developing rapidly, for storage especially, but the intermittency of renewable energy is still a challenge to be met. The scale of that challenge, however, is less ominous than I thought. If we are building that new system for energy actually used and not comparing sources solely on the basis of production ROI, the future looks brighter. While concerns about mineral availability and EROI are well founded, ongoing developments suggest that a complete transition to an alternative energy system is plausible. This transition will likely require a combination of technological advancements, efficient energy utilization, and a shift in focus from energy replacement to maximizing energy services while reducing waste.

By Rachel Lyn Rumson


References

Barnard, M. (2023, February 13). Why Aren’t Energy Flows Diagrams Used More To Inform Decarbonization? CleanTechnica. https://cleantechnica.com/2023/02/13/why-arent-energy-flows-diagrams-used-more-to-inform-decarbonization/

SKAGEN Fondene (Director). (2023, January 16). Mark Mills: The energy transition delusion: inescapable mineral realities. https://www.youtube.com/watch?v=sgOEGKDVvsg

Brockway, P. E., Owen, A., Brand-Correa, L. I., & Hardt, L. (2019). Estimation of global final-stage energy-return-on-investment for fossil fuels with comparison to renewable energy sources. Nature Energy, 4(7), Article 7. https://doi.org/10.1038/s41560-019-0425-z

Lithium Mining: The Economics of the Future

Lithium Mining: The Economics of the Future

The recent discovery of a “world-class” lithium deposit in Newry, Maine, has sparked off a contentious debate over the environmental and economic future of the State. In response to this revelation, a recent bill was proposed to change Maine regulations to allow for unlimited mining for metals of any size, with up to 100 acres per individual location. However, the bill would retain Maine’s regulations requiring developers to prove that there will be no acid mine drainage or harm to water before any mining begins. Currently, Maine only permits open pit metal mining in 3 acre sections. 

Geologists believe the lithium deposit has a value of over $1 billion dollars, presenting Maine with an economic opportunity. The lithium crystals appear to be of very high quality, far surpassing the quality necessary for batteries. Furthermore, the change in regulations will affect the harvesting of other metals considered crucial for the transition to green energy, including a manganese deposit in Aroostook county. This has led to several environmental groups, including the Maine Department of Environmental Protection, coming out in support of this regulatory change, while others want the acre limit reduced or outright oppose the relaxation of mining regulations. 

There are also several other bills under consideration by the Environment and Natural Resources Committee. These alternatives present a range of options, such as a five-year moratorium on lithium mining, as well as a proposal that would exempt the type of minerals found in Newry from the law altogether. 

At the center of this mining debate is whether or not the definition of “metallic mineral” should be changed. Advocates want to make exemptions for lithium and other metals used in renewable energy. This is because Maine’s quarrying rules are much less stringent, making for a more efficient but less stringent process.

Under current law, “metallic mineral” is a policy definition which depends on what the harvested metals are used for. This makes it difficult to classify minerals on how they might be used in the future. This is especially true in regards to Newry, where the metals would be sold to out of state distributors. 

This topic is a clear example of how environmental and economic issues intersect. The push for sustainable green energy is creating a demand for lithium and other metals. This, in turn, necessitates more mining, which has a negative effect on the environment. Meanwhile, for the State of Maine, taking advantage of these deposits presents economic opportunities at the potential cost of the local environment. In a strange political twist, prominent environmental groups are calling for an expansion to mining and decreased regulations surrounding these metals, making the calculation that the long term economic and environmental benefits outweigh the risks. In conclusion, the national transition towards renewable energy is shaping the economic, cultural, and environmental debate in Maine. It will ultimately be up for the state to decide, but the economic and environmental tradeoffs are fascinating and caught our attention here at rbouvier consulting. If you are interested in this issue, the referenced sources below provide more detail, or contact us directly. 

Works Cited: Cough, K. (2023, April 24). State lawmakers consider removing size limits on open-pit metal mines. Press Herald. Retrieved April 25, 2023, from https://www.pressherald.com/2023/04/23/state-lawmakers-consider-removing-size-limits-on-open-pit-metal-mines/

What is a Regenerative Economy?

What is a Regenerative Economy?

Does it mean biological means of production? While regenerative farmers are talking about high yields with no-till methods and soil biodiversity, some economists are talking about “a new vision for prosperity” that leaves behind the “rational man” of neo-classical economics for a new model of participation and dignity, one that meets the social needs of everyone while operating within the ecological limits of the planet. 

One of the most prominent voices for a regenerative economy is Kate Raworth, author of Doughnut Economics: Seven Ways to Think like a 21st  Century Economist. Raworth recently spoke at Schumacher Center for New Economics on the topic of Planetary Economics: New Tools for Local Transformation. In her talk last November to a record-breaking number of attendees for the Institute, Raworth suggested that transformation of the economy to save the planet is imperative and that the innovation we need is going to come from that bottom-up and be local. She is offering the Doughnut model as a guide and has launched the Doughnut Economics Action Lab as a collaborative toolbox for local economic renewal and participatory climate action.

The basic theory on Doughnut Economics focuses on a thriving future that emerges from balancing the ecological ceiling and the social foundation. The model has been adopted by over 40 cities and regions including Philadelphia, Amsterdam, Leeds, Barcelona, Mexico City, and Toronto. Place-based administrations and community coalitions around the world are using it as a way to reimagine and recreate the future in balance.

Raworth suggests that through multiple crises, humanity is awakening to an awareness of our profound interconnectedness with the living systems of Earth, and each other. Raworth’s idea for a regenerative and distributive economic reality is interesting. The framework borrows from the UN’s 17 Sustainable Development Goals to define the social foundation as the essential of life. The outside of the doughnut are the planetary boundaries defined by Roskstrom et al (2009). The planetary boundaries are what keeps life working on Earth. Raworth compares her doughnut to the dynamic circles of various Indigenous cultures around the world symbolizing health and wellbeing. She says that she is coming to see the doughnut as a “Western economic mindset recovery program”.  

We are paying attention to Doughnut economics because of the way that it embeds the economy within society and within the environment.

What does this mean for our clients and colleagues? We think that the model is useful as a holistic view for municipalities, civic organizations, businesses, trusts and finance. Whichever sector you are in, whether you’re in the visioning stage, looking for participatory tools for engagement or need just-in-time research or local impact analysis, we can help. Our consultants will partner with you to help you learn about the challenges of the changing world. 

Here are the eco-social and inventories areas of the doughnut. Contact us to learn more about the Doughnut or any of these parameters. Let us know if you are working on a Portrait of Place.

Ecological ParametersSocial Parameters
climate crisismobility / transportation 
load on the soilcommunity and connectedness
freshwater consumptionsocial participation and equality
loss of biodiversityhousing and energy
greenhouse gas emissionshealth and education
waste production, pollutionfood and water
deforestation and land use changework and income
air pollutionculture
peace and justice
political participation

Blog post is by Rachel Lyn Rumson


References

Rockström, J., Steffen, W., Noone, K. et al. A safe operating space for humanity. Nature 461, 472–475 (2009). https://doi.org/10.1038/461472a

Rachel’s Journal Roundup Q3 2022

Rachel’s Journal Roundup Q3 2022

  1. Theine,H.; Humer, S.; Moser, M.; Schnetzer, M. 2022. “Emissions inequality: Disparities in income, expenditure, and the carbon footprint in Austria,” Ecological Economics (197).

Recently, we completed a project for the Blue Hill Heritage Trust, where we estimated the economic, social, and environmental carrying capacity of the peninsula. One of the issues we considered was the environmental impact of those moving to the area. Like many areas in Maine, the Blue Hill region is seeing an influx of wealthier individuals to the area, primarily due to the rise of remote work. One question that was brought up for us is how households’ environmental impact changed with higher income levels. This article investigates the carbon content of households’ expenditure patterns. They find that the top decile of the income distribution in Austria receives 22% of national income, spends 18% of national expenditure, and causes 17% of emissions. The bottom decile, by contrast, accounts for just 3% of national income, 4% of expenditure, and 4% of emissions. While the article focuses on Austria, results are suggestive for the United States, where income inequality is much larger than it is in Austria. 

While differences in income may explain some of the differences in emissions, they only explain about one third of the difference, implying that the remaining two-thirds of the variation in emissions is attributed to other factors. Not surprisingly, results show that characteristics such as housing stock, heating fuel, and car dependence all contribute to the variation in household carbon emissions. 

These results are not surprising. However, they do bring up a question about the environmental footprint of households moving to Maine (and other places). If, as evidence seems to indicate, higher income people are moving to Maine, it may presage an increase in carbon emissions, based upon these results.  However, the potential good news is that two-thirds of the variation in emissions was due to other factors. If newcomers to Maine reduce their dependence on fossil fuels either by weatherizing or upgrading existing housing stock, they may be able to mitigate some of the increase in emissions coming from increased consumption. If public transportation can be improved in areas that are attracting in-migrants, so much the better. It is possible that an influx of in-migrants will increase carbon emissions. But it is not inevitable.

  1. Kovacs, K.; West, G.; Nowak, D.; Haight, R. 2022. “Tree cover and property values in the United States: A national meta-analysis.,” Ecological Economics (197).
Tree canopy” by Jim Stanton is licensed under CC BY 2.0.

This article explores the relationship between tree coverage and property values. The authors refer to tree coverage as a public good because increased tree coverage in a given area of a neighborhood has been shown to increase value of the homes throughout the entire neighborhood. A representation of this relationship would help municipalities quantify the benefits of community forestry programs. 

The hedonic property value method is a statistical technique that can be used to assess the value of ecosystem services to property. However, these studies are expensive and time-consuming, and oftentimes, local governments are unable to access the resources needed to carry out these analyses. The authors used hedonic property studies conducted in the past to create a benefit transfer tool (whereby multiple hedonic analyses are combined in a meta-analysis) that can be used to measure the value of tree coverage in communities that have not yet conducted hedonic property value analyses. 

Results indicate that where existing tree cover is low, increasing on-property tree density increases property values, while increases in off-property tree cover has no statistically significant effect. In contrast, where tree cover is medium to high,, off -property tree cover has a greater positive effect on property valves than on-property tree cover. This perhaps reflects the belief that high density tree cover on the property is seen as increasing maintenance costs. 

Although the study finds relatively low property value effects, increases in property values are only a small part of the benefits of increased tree cover. The ecosystem services provided by tree cover include air filtration, soil stabilization, flood control, recreation, and habitat provision, as well as aesthetic value. The authors conclude by noting that hedonic property studies can also be used to support open space zoning and green space ordinances.

  1. Mueller, J. 2022. “Natural Resource Dependence and Rural American Economic Prosperity From 2000 to 2015,” Economic Development Quarterly 36(3):160–176. 

This article investigates the role that natural resources play in the economic development of US counties. There are two types of natural resource development: extractive natural resource use, such as oil and gas, mining, and timber, and non-extractive, such as tourism, recreation, and real estate. The author points out that dependence on natural resource development has been shown to be associated with decreases in per capita income, increases in inequality, and elevated poverty in the long term (the so-called “resource curse”). Yet not as much attention has been paid in the literature to the dependence on non-extractive natural resource development. This study aims to correct that, by studying both forms of resource development on economic outcomes in rural counties across the United States. The author makes a distinction between remote rural counties and metro-adjacent rural counties. 

The author finds that the relationship between natural resource development and economic prosperity varies between non-metropolitan remote and nonmetropolitan metro-adjacent counties. Generally speaking, high levels of dependence on either extractive or non-extractive resource development was associated with negative economic outcomes for both remote and metro-adjacent rural counties. However, these relationships were complex. Non-extractive resource development in particular has been promoted in some strands of the literature to have a positive effect on economic outcomes in rural areas. But this work casts doubt on that hypothesis, indicating that non-extractive resource development may actually have a negative effect on the economic outcomes of remote rural counties, perhaps due to the low wages in many of those industries. More work needs to be done in this area.

Wind power is back!

Wind power is back!

Photo: US Department of Energy

This past week, newly elected governor Janet Mills ended former governor Paul LePage’s ban on wind farms in certain areas of the state

As an environmental economist, I am in favor of increased wind power in the state.  Renewable energy sources, such as wind, solar, and in certain circumstances, hydropower, will help with our  much needed transition away from fossil-fuel based energy..  Furthermore, wind power provides well-paying jobs in construction in primarily rural areas of the state, as well as property taxes, the potential for income for rural landowners, and other tangible benefits to host communities. 

However, concerns about large-scale wind farm development include potential negative impacts on nearby residents, tourism, and wildlife.  Questions include:

  • Do wind farms enhance or detract from tourism? Answer: it depends on the context.  Some studies have found that proposed wind farms affect potential demand for tourism, but those studies are hypothetical, not actual. A recent study in Scotland found that there was no correlation between existing windfarms and tourism-related employment.    Other case studies have shown that wind farms can actually be a boon to tourism, if local tourism agencies market them as a tourist attraction .   More work needs to be done on looking at the effect of actual, operating wind farms on tourism in different contexts.  In any case, the concern about conflicts between wind farms and tourism can be mitigated by proper planning and siting.
  • Do wind farms have a significant impact on migratory birds?  The answer here depends on what you consider significant, and again, it depends on the context.  Wind turbines located in migratory corridors have been linked to avian mortality, and those deaths are increasing as wind power generation itself increases.   Still, some studies suggest that wind-power related avian deaths are less than those associated with other forms of energy, and much less than those associated with the average housecat.  However, that does not mean we should brush those concerns away lightly. New technologies in turbine and blade design, as well as proper modeling and siting procedures – as well as simply shutting down generation during peak migration – should mitigate this concern.
  • Do wind farms increase or decrease property values or property taxes? Evidence shows that large-scale wind development in residential areas does have a negative impact on homes in direct proximity (much like any other energy-related infrastructure), and that this effect declines as distance to the wind farm increase.  However, properties in rural areas that are host to a turbine can see an increase, as the potential for income from the land is realized https://www.cfra.org/news/180719/are-property-values-affected-wind-farms.  There also is evidence that the added property tax revenue from a wind farm can reduce a town’s overall mil rate.  Again, these concerns can be mitigated by proper planning and siting.        

In other words, evidence abounds on both sides of the debate, and is context-specific. We do need to be cautious about where these facilities are located, from an environmental and aesthetic context. But in the words of Governor Mills: “It is time for Maine to send a positive signal to renewable energy investors and innovators.”

Note:  This blog post is based on a  “Maine Voices” column written by Dr. Bouvier and published in February of 2018 \lsdpri

Keeping the Lights On Doesn’t Mean More Pollution

Keeping the Lights On Doesn’t Mean More Pollution

Photo – Creative Commons/Flickr Amy the Nurse

In August of 2017, Energy Secretary and former governor Rick Perry proposed to strengthen subsidies to coal- and nuclear-fueled electricity plants.  Why?  According to his proposal, coal and nuclear power plants are indispensable to our national security by virtue of the fact that they can store energy on-site. And, since the past few years have seen declines in both coal and nuclear facilities in the United States, the concern is that the nation’s electricity grid will be less reliable in the future. The proposal would have guaranteed cost recovery and a fair rate of return for generators that can store at least 90 days’ worth of energy on site.  Fortunately, the Federal Regulatory Commission rejected it.  Even so, it’s still worth looking at the pros and cons of such a proposal.

More power outages and more disruptions would, of course, harm our energy-intensive economy. As the recent spate of hurricanes (including high winds in my home state of Maine) have shown, such energy disruptions can be costly. In fact, 2017 was the costliest year in terms of economic damages from natural disasters in the US.

Would subsidizing coal and nuclear facilities really have been the best solution? To answer that, we need to take a deeper look.  When I teach cost-benefit analysis, I encourage my students to consider the baseline – what would have happened in the absence of the policy or proposal in question. The number of coal and nuclear plants in this country has been declining for decades. The decline can be attributed to several factors, including environmental regulations, but mainly the declines are due to market forces (low electricity prices, declining electricity demand, and new supplies from natural gas) and aging infrastructure. Without taking a close look at the finances of the plants in question, we can assume that at least some of these plants would have been likely to follow.  Increasing subsidies to already struggling nuclear and coal plants would likely have been just another case of throwing good money after bad.

When considering the costs and benefits of the proposed plan, there would have been several different categories, each accruing to different groups.  The beneficiaries of the plan would likely have been owners and shareholders of the qualifying coal and nuclear plants.  Their consumers, as well, may have benefited from a lower average wholesale price of electricity; however, the proposal recommended adding a surcharge to consumers’ bills in order to cover the costs. According to the analysis done by Resources for the Future, the drop in the wholesale price of electricity would not have been enough to cover the surcharge.

Moreover, practitioners of cost-benefit analysis need to carefully consider all the costs and benefits of a proposal, not just those that are easily monetized.  A complete analysis of the costs and benefits of Secretary Perry’s proposal should include the damages caused by pollution from coal and nuclear-powered plants to humans and agriculture. (While the generation of electricity from nuclear plants does not create air pollution, the mining for uranium does create environmental destruction.) Such external costs are in reality a passive subsidy that coal and nuclear plants have enjoyed for decades. An additional subsidy would exacerbate the problem. According to the analysis done by Resources for the Future, the proposed plan would have immediately increased sulfur dioxide and nitrogen oxide, two pollutants generated by the combustion of fossil fuel.  This increase in emissions is linked to an increase in premature deaths caused by respiratory diseases such as chronic bronchitis and emphysema. Once environmental costs are factored in, net benefits to society would have been decidedly negative.

The next question is: would the subsidies have alleviated the problem of grid instability? The answer to this question actually lies in the question itself.  Is there really a problem of power disruption caused by declining coal and nuclear plants? Some recent research by the Rhodium Group says no.  Researchers examined the data collected by the Department of Energy whenever an electricity generator experiences an outage or a disturbance.  Results indicate that disruptions in fuel supply were responsible for less than 1 one hundredth of one percent of lost customer service hours between 2012 and 2016.  The remainder were caused by disruptions to energy distribution  Primarily, those disruptions were caused by severe weather, not by supply disruptions.  The FERC ultimately agreed when it rejected Secretary Perry’s proposal.

However, the FERC did agree that the reliability of the grid was an issue looking into.  If the goal of Secretary Perry’s proposal was to increase the reliability of the grid – not just to prop up nuclear and coal – there are several less costly and ultimately beneficial ways of doing so.  One such possibility is to replace our nation’s aging energy-related infrastructure, much of which dates to the 1950s and 60s. Energy infrastructure actually received a “D+” on the 2017 report by the American Society of Civil Engineers. Upgrading the energy infrastructure would come with many ancillary benefits.

A second alternative would be to invest in distributed energy and microgrids.  Distributed energy is the use of small, decentralized power generation and storage systems. While larger utilities consider the rise of distributed energy to be a threat to the existing system, the greater use of distributed energy could actually increase the resilience of our current, outdated system.  However, doing so will require innovations in monitoring, modeling, “smart switches,” and other technologies to manage peak demand and integration.

A third possibility is to invest in better long-term energy storage. Lithium ion batteries may be our best choice for now, but other storage technologies, such as flow batteries or zinc air batteries.  But by far the best alternative – one that should be a crucial part of any solution – is energy conservation.  A unit of energy conserved is one that doesn’t need to be generated.  You don’t get much more reliable than that.