We'd like to announce, once again, that we told you so

What we've said over these years is that some damn fool is going to insist upon doing something damn foolish about this climate change thing. the political and social head of steam is such that this just is going to happen. Thus we should all be insisting that what is done is the only sensible response to the problem if it exists, a carbon tax. As the Stern Review and every other economist studying the problem insist. For if we don't so insist then damn fool things like this will happen.

True, this is from the colonial cousins where things are always more extreme but still:

Following the prolonged cold snap, PJM, the entity that oversees utilities in the Mid-Atlantic and parts of Appalachia and the Midwest, put a plan into action: It would help the local utilities ensure that power was more reliable. To do this, PJM fast-tracked new rules for capacity resources — an industry phrase for guaranteed electricity supply. The Federal Energy Regulatory Commission (FERC) approved the new rules last May.

Renewables tend not to supply on demand. Thus a renewables based system needs to make sure that there is sufficient power available on demand and may well have to make payments just to make sure that such capacity is built and is ready to roll. Then the twist:

Under the new rules, renewable energy providers, such as solar and wind companies, will have a hard time participating in PJM’s capacity market, where utilities pay to make sure that they have a certain amount of electricity guaranteed in future years. The new rules require the providers in the market to be able to provide consistent production year-round, whereas wind and solar perform better during different parts of the year.

“The new rules will funnel billions of dollars from electricity consumers to fossil and nuclear power plants while severely limiting clean energy participation in PJM’s capacity market,” writes Jennifer Chen, an attorney with NRDC’s Sustainable FERC project.

The capacity market exists because renewables cannot be relied upon over time. But to not allow renewables to compete for the capacity payments is discrimination against renewables and thus something that must be fought in court.

We admit that we wouldn't have and didn't predict this particular damn foolishness. But we would and did something like it. Any system of ever more bureaucratic control is going to be subject to interventions like this.

Thus, assume that we really do have a problem here, or any other problem of a similar nature. We need to put a crowbar into market forces to account for an externality for example. Fine, but we should also make just the one intervention, insert just the one crowbar, and then allow market forces to work out the details. In this case, the Pigou Tax of a carbon charge is far better than endless wrangling in the courts over whether windmills should get capacity payments. The entire capacity payment system dependent upon the fact that we cannot rely upon windmills when the wind doesn't blow.

We really did tell you so. If we're going to do something then let's do the carbon tax.

 

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