Amateur Earthling

No Vision for East Arapahoe

I went to the Open House for the city’s Envision East Arapahoe project last night. This process was originally supposed to look at transportation improvements and potential land-use changes along the East Arapahoe corridor. But based on the presentation from and some conversations with staff, it sounds like they’ve scaled the project back on the land-use side to only considering what the best split between employment/retail/housing would be for the 4,300 jobs they estimate could be out there under current zoning but which haven’t been built out yet. When you compare that number to the existing ~34,000 jobs in the study area, it’s clear that no change in the character of the corridor is going to be considered.

Which is amazing, because it’s horrible for the most part now. People who have to walk and bike through the area use words like “hellhole” and “wasteland” and “disaster area.” But I guess Motordom seems to think it’s just fine as is.

The city has apparently been inundated with “Don’t make it like Boulder Junction!” comments, and so have been scared off from doing anything substantial to the land use. Of course there’s still lots of flowery language about bike and pedestrian amenities, but they’ll be of little use if there are no destinations in the area to speak of, and it continues to have a giant freeway running through the middle of it.

At this point it feels like the best outcome within these constraints might be to stop throwing planning resources toward land use changes at all (including the 4,300 jobs/housing/etc) but get a real BRT line along Arapahoe, so that if/when we come to our senses on land use, the transit trunk line capacity is already in place to potentially support redevelopment without creating a traffic disaster.

It would be nice if there was at least one scenario modeled in all this — if they’re going to continue putting staff hours into it — that included substantial changes to the zoning. Just to see what it looks like in terms of VMT, GHG emissions, potential street cross-sections, etc.

It would also be nice if the superblock between the east CU campus and Boulder Junction got special treatment, and were looked at with an eye toward knitting those two urbanizing areas together into one cohesive whole. It’s miserable to walk or bike through now, built to very low intensity with a ton of surface parking, but it could be a wonderful mixed use district served well by the new transit hub and in easy walking distance of the University. Restaurants, lab and office space for university spin-offs or startups, some housing, etc. More than any other part of the Arapahoe corridor, that place seems to have a context that demands some re-envisioning in the shorter term.

The whole package goes to Council tonight (Tuesday, 10/28) for their feedback.

Is profit driven affordable housing possible?

Last week at the Better Boulder Happy Hour (B2H2) we tried to talk about affordable housing. The little nook at the Walnut Brewery was so packed that it was hard to even have a face-to-face conversation with folks, let alone do any kind of presentation that didn’t sound like an attempt at crowd control. Which is good I guess… but not exactly what we’d planned. I think a good chunk of the attendance was due to all the buzz generated by last Tuesday’s City Council meeting, and the talk of a citywide development moratorium. Anyway, it was a learning experience. We want these events to be informative, but also to get people talking to each other, and have it be more fun and social and network-building than a brown bag seminar or lecture that’s mostly going to appeal to the Usual Suspects, who are already engaged. We need to get more “normal” people to show up and engage on these issues.

In any case, Betsey Martens, director of Boulder Housing Partners (the city’s housing authority) got up and said a few words to the assembled crowd. She made a point which is in retrospect obvious, but that got me thinking anyway. The costs of creating additional housing in Boulder (or anywhere, really) can be divided up into three categories:

Hard development costs — the cost of actually building the housing.
Soft development costs — e.g. the financing and permitting costs, carrying costs associated with regulatory delay, organizational overhead, etc.
The cost of land.

She pointed out that you can do all the work you want to reduce hard and soft development costs — using standardized designs, prefabricated buildings, streamlined permitting for affordable housing — but ultimately those optimizations just nibble around the edges of affordability. The real driver of housing costs in a desirable place is the cost of the land, which is pretty irreducible. If you’ve got a funding stream (as we do here from our inclusionary housing policy), then you can buy up a bunch of land and create housing on it, but there’s still an opportunity cost to be had for using the land inefficiently — the same money might have created more affordable housing.

The obvious way to attack this problem is to spread the fixed land cost across more dwelling units. You may not be able to reduce the price of the land, but you can share it with more people, decreasing per unit costs, and increasing density. Naysayers are quick to point out that all the density in Manhattan and Tokyo has not made them cheap. A common response is that they’re cheaper than they would have been if they hadn’t been more densely developed, but I’m not sure this is really the right answer (even if it’s true).

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Utilities Decoupling to Cover Their… Assets

Last month, Xcel Energy subsidiary Public Service Company of Colorado (PSCo) filed a rate case at the Colorado Public Utilities Commission (Docket: 14AL-0660E). A lot of the case — the part that’s gotten most of the press — is about PSCo recovering the costs of retiring and retrofitting coal plants as agreed to under the Clean Air Clean Jobs Act (CACJA) of 2010. However, there’s a piece of the case that could have much wider implications. Way down deep in the last piece of direct testimony, PSCo witness Scott B. Brockett:

…provides support and recommendations regarding the initiation of a decoupling mechanism for residential and small commercial customers.

This recommendation has captivated all of us here at CEA because it could open the door to Xcel adopting a radically different business model, and becoming much more of an energy services utility (PDF), fit for the 21st century.

To explain why, we’re going to have to delve a ways into the weeds of the energy wonkosphere.

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Humans as Curators in Troubled Times

We had some of that golden evening light tonight just after house meeting. The kind that makes you think maybe an apocalypse is just over the horizon. That the mountains are on fire. That the gods are angry. This Saturday I went for a long bike ride up to the Peak to Peak highway with Amy from Picklebric. At the Sunshine Saddle she pointed out the cheat grass — an invasive species that she works on. Studying disturbed ecosystems, and how to assemble new approximations of the originals from the parts at hand. You can’t get rid of the invasives, but maybe you can influence which ones thrive. Just beyond the divide above us, the mountains covered with red trees, a forest being transformed in a lifetime. 500 years from now will they be the Aspen mountains? Tim applied for a job at the Nature Conservancy as a landscape ecologist in a similar vein — understanding and managing wild and semi-wild lands for their own sake. Like the Colorado river pulse. All this made me think of the ecopoesis that Kim Stanley Robinson portrayed in his Mars books, especially Green Mars. Humans as gardeners of the no longer quite wild. From here on out, it’s all gardening. Mandatory gardening. It’s just what kind of garden do we want? What will grow in this climate?

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Facing the Risk in Fossil Fueled Electricity

I recently wrote about how our risk tolerance/aversion powerfully affects our estimation of the social cost of carbon, but obviously that’s not the only place that risk shows up in our energy systems. Fossil fuel based electricity is also exposed to a much more prosaic kind of risk: the possibility that fuel prices will increase over time.

Building a new coal or gas plant is a wager that fuel will continue to be available at a reasonable price over the lifetime of the plant, a lifetime measured in decades. Unfortunately, nobody has a particularly good record with long term energy system predictions so this is a fairly risky bet, unless you can get somebody to sign a long term fuel contract with a known price. That doesn’t really get rid of the risk, it just shifts it onto your fuel supplier. They take on the risk that they won’t make as much money as they could have, if they’d been able to sell the fuel at (higher) market rates. If the consumer is worried about rising prices, and the producer is worried about falling prices, then sometimes this can be a mutually beneficial arrangement. This is called “hedging”.

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Geology and Markets, not EPA, Waging War on Coal

With the release of the Environmental Protection Agency’s proposed rules limiting carbon pollution from the nation’s electricity sector, you’ve no doubt been hearing a lot of industry outrage about “Obama’s War on Coal.”

Don’t believe it.

Despite the passionate rhetoric from both sides of the climate divide, the proposed rules are very moderate — almost remedial. The rules grade the states on a curve, giving each a tailored emissions target meant to be attainable without undue hardship. For states that have already taken action to curb greenhouse gasses, and have more reductions in the works, they will be easy to meet. California, Oregon, Washington, and Colorado, are all several steps ahead of the proposed federal requirements — former Colorado Governor Bill Ritter told Colorado Public Radio that he expects the state to meet the proposed federal emissions target for 2030 in 2020, a decade ahead of schedule. This isn’t to say that Colorado has particularly clean power — our state has the 10th most carbon intensive electricity in the country, with about 63% of it coming from coal — but we’ve at least started the work of transitioning.

Furthermore, many heavily coal dependent states that have so far chosen to ignore the imperatives of climate change (e.g. Wyoming, West Virginia, Kentucky) must only attain single-digit percentage reductions, and would be permitted to remain largely coal dependent all the way up to 2030. Roger Pielke Jr. and others have pointed out that in isolation, the new rules would be expected to reduce the amount of coal we burn by only about 15%, relative to 2012 by 2020. By 2030, we might see an 18% reduction in coal use compared to 2012. Especially when you compare these numbers to the 25% reduction in coal use that took place between 2005 and 2012, and the far more aggressive climate goals that even Republicans were advocating for just two presidential elections ago, it becomes hard to paint the regulations as extreme. Instead, they look more like a binding codification of plans that already exist on the ground, and a gentle kick in the pants for regulatory laggards to get on board with at least a very basic level of emissions mitigation.

So, in isolation, there’s a limited amount to get either excited or angry about here. Thankfully, the EPA’s rules will not be operating in isolation!

Continue reading Geology and Markets, not EPA, Waging War on Coal

The Myth of Price

Our society’s prevailing economic zeitgeist assumes that everything has a price, and that both costs and prices can be objectively calculated, or at least agreed upon by parties involved in the transaction. There are some big problems with this proposition.

Externalized costs are involuntary transactions — those on the receiving end of the externalities have not agreed to the deal. Putting a price on carbon can theoretically remedy this failure in the context of climate change. In practice it’s much more complicated, because our energy markets are not particularly efficient (as we pointed out in our Colorado carbon fee proposal, and as the ACEEE has documented well), and because there are many subsidies (some explicit, others structural) that confound the integration of externalized costs into our energy prices.

The global pricing of energy and climate externalities is obviously a huge challenge that we need to address, and despite our ongoing failure to reduce emissions, there’s been a pretty robust discussion about externalities. As our understanding of climate change and its potentially catastrophic economic consequences have matured, our estimates of these costs have been revised, usually upwards. We acknowledge the fact that these costs exist, even if we’re politically unwilling to do much about them.

Unfortunately — and surprisingly to most people — it turns out that understanding how the climate is going to change and what the economic impacts of those changes will be is not enough information to calculate the social cost of carbon.

Alone in the Wilderness

I’ve been thinking a lot about risk tolerance and discount rates lately, and how they profoundly shape our perception of the economic costs associated with minimizing climate change. Basically… if you’re willing to vary your preference for the present over the future or the level of uncertainty you’re willing to accept, then you can make mitigation cost whatever you want. All else being equal, low discount rates and low risk tolerance make taking action cheap, while high discount rates and high risk tolerance make it expensive.

Unfortunately, we live in a society with high discount rates and high risk tolerance. Or at least, that’s what you’d infer from our collective behavior. It’s also what you’d gather from a lot of the rhetoric around climate action, and our obsession with trying to make it “economically efficient”, to the point of maybe not doing it at all. Our risk tolerances and discount rates aren’t really objectively measurable. They are fluid, and context sensitive. The same person in different situations will not behave consistently. Different people in the same situation may come to different conclusions. How we deal with uncertainty and the value of the future is a personal as well as cultural decision.

For some reason, I find myself with a low pure time preference, and an aversion to many kinds of risk. This is part of why I find our unwillingness to act on climate infuriating, and why I’m working on climate policy. I got to wondering, how did I end up this way? Why isn’t it more common?

Continue reading Alone in the Wilderness

Coal Geology vs. Coal Economics & Politics

The geology part of classifying coal as reserves is a lot of work, but it’s doable — with enough drilling logs and other data, you can determine where the coal is, how much of it there is, and its general quality. Once you’ve got that concrete geologic understanding, it’s unlikely to change drastically — it might be refined modestly over time, maybe increasing as mining technology improves… but if you’ve done the work well, you’re probably not going to suddenly discover that 90% or 99% of the coal you thought was there actually isn’t.

The economic part part of classifying coal as reserves is fundamentally different, and more changeable with time, because market conditions change much more quickly than geology! I think the experiences of the UK and Germany are particularly interesting, because they were both early large coal producers, part of the first wave of fossil fueled industrialization. They’re extremely mature hard coal mining provinces that have fallen off their peak production dramatically — they’re ahead of the curve that most of the rest of the world is still on.

The drastic downward revisions that both the UK and Germany made were due to changes in economic policies and domestic politics — not geology. Both nations historically had strong labor interests tied to coal mining, and the desire (like most nations) to maintain an indigenous energy supply. But as the cost of supporting the industry grew and its productivity fell, the political logic of maintaining the illusion of a viable coal-based energy system faded away. In Germany, it seems likely that popular support for the nation’s ambitious Energy Transition made it easier for the nation to face up to geologic reality. In the UK the politics seem to have been influenced by the Thatcher government’s desire to privatize previously nationalized industries like coal mining, as well as the discovery of massive offshore natural gas reserves in the North Sea. In both cases the “proven reserve” numbers appear to have vastly overstated to begin with, but the political desire to support the industry and maintain the illusion of long-term energy independence was a powerful incentive to ignore the geologic reality.

However, in the end, geology wins.

Where are we headed?

The EIA’s admission that we have not, as a nation, officially and transparently evaluated the economics of extracting our vast coal resources opens the topic up for discussion. The economic and political forces at work today in the US may be different than they were in 1980s Britain, or early 2000s Germany, but they’re pushing in the same direction. A powerful incumbent coal industry is weakening both financially and politically — because of their own increasing production costs, low natural gas prices, flat electricity demand, plummeting renewable energy costs, and concerns about both traditional pollution and greenhouse gas emissions. This gives us the opportunity to re-evaluate our policies around them. What should we change?

We might start with ending the practice of soft pricing in uncompetitive BLM coal lease auctions, as laid out by the Government Accountability Office in February. However, by far our largest subsidy to the industry is our acceptance of the externalized costs they impose on us. A 2011 Harvard study (on which CEA co-founder Leslie Glustrom was a co-author) estimated these costs to be roughly $345 billion/year in the US — equivalent to adding $0.18/kWh of coal fired electricity (explore the study graphically, or see the full peer-reviewed paper).

Even if we ignored traditional environmental impacts and public health consequences, and just applied the modest $37/ton social cost of CO₂ calculated by the US Office of Management and Budget, that would add roughly $60 to the cost of a ton of coal! With current PRB production costs in the neighborhood of $10/ton, and operating margins often less than $1/ton ($0.28/ton in the case of Arch last year), this — or even a smaller carbon price — would likely be a crushing blow to the fuel.

Given the current state of the industry, even without these “drastic” policy changes it’s possible that we are headed for our own major downward reserves revision. This isn’t “running out of coal”. Britain and Germany both still have enormous amounts of coal — it’s just not worth digging much of it out of the ground, given the available alternatives. It’s time to figure out whether we’re in the same boat, admit it to ourselves and the world if we are, and move on to the task of building real solutions.

Two Possibilities, One Course of Action

There’s an irony in all this, which is that regardless of whether we’re running short on economically recoverable coal, we need to expunge the fuel from our energy systems as quickly as possible in order to avoid catastrophic climate change. If the global reserves numbers reported by the WEC are accurate, then we need to leave 60-80% of those reserves in the ground. This was highlighted most famously by Bill McKibben in Rolling Stone in 2012, and implies that a huge fraction of the world’s fossil fuel assets are in fact worthless, unburnable carbon, and most of the world’s coal companies and unconventional hydrocarbon extraction projects are destined for bankruptcy. On the other hand, if the reserve numbers need to be revised downward because most of the listed coal isn’t economically extractable, then a lot of the coal industry’s supposedly bankable assets are worthless and the industry’s growth potential is seriously constrained.

In either case, the right thing to do is stop planning as if today’s coal plants are going to continue operating for much longer, figure out a way to take them offline, and replace them with cost-effective, low risk, zero-carbon generation resources and energy efficiency.

US EIA on the Economics of Coal: No Comment
A Long Time Coming: Revising US Coal Reserves
In Good Company: A Brief History of Global Coal Reserve Revisions
Coal Geology vs. Coal Economics & Politics

Managed Lanes in Colorado

Will Toor and Mike Salisbury at the Southwest Energy Efficiency Project have put together a good paper called Managed Lanes in Colorado (it’s a PDF) that looks at the policy rationale behind (and a few issues with) creating additional highway capacity in the form of managed lanes with tolling, that also allow high occupancy vehicles and transit to take advantage of the investment, addressing some of the “Lexus Lane” criticism of using tolls in the public right of way (on projects that are still mostly publicly funded). It’s not quite as fun to read as my magnum opus from this winter on the same topic (US 36: For Whom the Road Tolls) but might be more appropriate for forwarding to policymakers.