My recent conversations on LinkedIn about Mitch Rolling's recent post come to mind. When crossing swords with a avid renewable supporter, they will always pull that the Midwest states are mostly wind have the lowest rates out of their playbook. What they skip over is which states have 100% mandated green energy and that effect on rates. While it's true the renewable subsidies are effecting reliability everywhere, their upward pressure on energy prices has been muted (for now) in fully competitive markets. Your article does an eloquent job of showing what happens as soon as a state jumps on the green train. It should create quite a stir on LinkedIn.
Great comment. On their Q4 2023 earnings call, Minnesota Power's CFO told an analyst to expect 14% compound annual growth in their regulated rate base from their ability to spend billions on unreliable renewables despite flat kwh sales - a staggering sum for ratepayers.
Understood. Thanks. And then, having rolled the EPS guide to base your 2025, is there a long-term rate based CAGR guide over the same period? I'm just kind of looking at this in reference to the prior 11% rate base CAGR guide that used 2022 as a base?
Steve Morris
Yeah. It's up a little bit. It’s probably closer to 14%.
There is a enabling element fot profit taking by investor owned utilities than needs to be taken into account. Green regulation provides a excellent opportunity to rake in additional profits and blame them on new regulations. I sent this article to Isaac this morning.
Exactly. We’re working on an article called “Greenplating the Grid” that looks at this in depth. I’ve heard stories of utilities being accused of gold plating their grids in the past. Do you have any good resources detailing this so we have more historical context?
Isaac Iwould research CPUC rate cases and associated news over the last 5 to ten years. All three big IOUs in California have been on the rate increase gravy train for a while now. The tatic has been small regular bites every four to six months rather than a massive step. Present Day I would watch DTE and the big New York IOUs to start similar activity. It will be small but frequent. The best way to boil a frog ....
I have to say - kudos on the music - love it - great approach to what could be a somewhat mundane subject for some!
Also love the reading section. Keeping us well educated one substack at time!
Living in rural Texas - I can say you are right about the jobs front and manufacturing, but also the dairy industry here in our area - I have seen their electric bills and it is a oh my moment! We have a few manufacturing facilities and they do hire so many of our workers with well paying jobs, we cannot afford to loose those facilities.
We are lucky to have reasonable electric rates, so far, but as the push for more and more renewables and the drive for the favored battery storage intensifies I am afraid that will not last long and they will go up, hurting so many of our older and disadvantaged populations.
So to sum up - it is not all blue states chasing the green dream - here in red Texas (for now) we are hurtling over the cliff too. The new economic development bill JETI - has attracted only a few applications from what I understand, now that renewables are out of the picture (yeah!), and I am hoping that more industry will come to Texas to help support our rural communities as our populations grow exponentially.
Thanks JF! I grew up on a dairy farm in a manufacturing town so this is personal for me too. Plenty of red states are also foolishly allowing utilities to shut down their coal plants and build unreliable generators
In the UK the Royal Society has called out the risks of relying on renewable with insufficient backup. Using weather from 37 years rather than a single good year the Royal Society flagged a requirement for 100 TWh of storage to get through multi-year low renewable generation.
Much noise has been made about the deindustrialization that is taken place in Germany and countries like it. However I would point out that we have since what a deindustrialization looks like in the United States, it's called the Rust Belt, at one time the industrial heartland of the country given it's proximity to ports, Candia, and the Northeast via the Great Lakes and cannels. Rust belt is defined by deindustrialization, economic decline, population loss, and urban decay on these regions. Starting in the 50s the declining in "energy intensive" industrial sector began bleeding from the area and has never recovered. Steelmaking, automobile manufacturing, and coal mining left the region for "greener pastures-pun intended", mostly to other countries like China, Vietnam, & Indian for Steel, cement, & chemicals. China & Mexico for automobiles. Taiwan, South Korea, & China for chips.
Now given the size and regional differences in the United States a lot of the deindustrialization for us is regional more than national. The south and southwest was consider by the more developed norther states as frontier or emerging markets given lack of population, infrastructure, education, & lax government regulations to respects to environment so many of our industries just moved south (automobiles to Alabama, Georgia, & South Carolina) or southwest (Semi conductors). So while some regions deindustrialization others where industrialization. This was just a musical chair from GDP perspective and masked the issues.
What is the common theme here? Higher labor cost, increase taxes & regulation, and ENERGY forced the move from the Rust Belt region to the South and Southwest. And now that these areas have been experiencing the same issues we saw the move overseas.
To demonstrate how important energy is to these equation, one can make the argument that without the Hoover Dam supplying low cost hydro power, the Semi Conductor industry would not have been able to developed or the United States is the home to crypto mining mainly because or cheap natural gas-other factors of course play into this however, the main contributing factor is cheap energy.
Not to sound insensitive, but 91 jobs is not a lot. Also, if people risked life and limb to travel to the New World or to the Western territories from the Eastern US, hundreds of years ago, is it too much to ask that someone travel by car or airplane to a new job?
Hi Spencer, the main point we were trying to me is that this is just the beginning and the high cost of electricity for facilities like this will cause more places to close down too.
While the thesis of this essay is interesting in its own right, I have to comment on two of your suggested readings; those by Travis Fisher and Nick Pope.
As Travis Fisher argues, with eight billion people hoping to share in the benefits of modern life, the externalities of modernity are vital considerations. As a tool of such analysis, though, the social cost of carbon (SCC) is pretty flawed because the long time line makes the discount rate assumed in its benefit/cost calculation the biggest fudge-factor one can imagine. It renders all other considerations practically meaningless. To arrive at a robust result, modestly indifferent to discount rate, the costs have to be unbearably large and benefits near term. No one can imagine anything that reasonably fits the bill.
Nick Pope demonstrates how the Biden Administration is playing games with the implementation of ruinous carbon policies to make sure the bad tasting medicine doesn't upset their electoral needs. In a way this is like fiddling with discount rates, but it is also similar to what utilities are doing with respect to their integrated resource plans (IRPs). Compare recent IRPs to their predecessors to see the utilities constantly stretching out the bad news inherent to this energy transition. Is this because they, themselves, are slowly becoming aware of problems, or that they have been aware all along and are trying to avoid awakening utility regulators too early?
I think your last question is exactly right. The utilities know the wind and solar experiment will fail but they will get to bilk ratepayers multiple times before they wise up and the utilities ultimately invest in nuclear power.
400 years ago Pope Urban VIII and his Inquisition declared that Earth was the stationary center of the universe – deniers will be drawn and quartered – Bruno.
An equivalent UN global warming cabal has currently declared the GHE with 0.04% CO2 are the atmospheric control knob which mankind, as the fixed center of the globe, is catastrophically warming - denier’s careers will be drawn and quartered – Soon.
The two are cut from the same bogus cloth.
“E pur si muove.”
1. Earth is cooler with the atmosphere, water vapor and its 30% albedo not 33 C warmer as the GHE claims. https://youtu.be/Ld0aplwo1hI
2. The ever-popular GHE power flux/heat balance/budget graphics don't balance plus they violate the LoT. (Yes, they REALLY^3 do!!) https://youtu.be/KZnMXNxux8s
3. The kinetic heat transfer processes (Conduction, Convection, Advection, Latent) of the contiguous atmospheric molecules render the “extra” energy of a near Black Body surface impossible. A system’s temperature is a function of the kinetic processes, radiation is a function of that temperature and follows those kinetic processes. As demonstrated by experiment, the gold standard of classical science. https://principia-scientific.org/debunking-the-greenhouse-gas-theory-with-a-boiling-water-pot/
Since both GHE & CAGW climate “science” are indefensible rubbish alarmists must resort to fear mongering lies, lawsuits, censorship and violence.
Poorly educated but diploma'ed urbanites are the death of civilization. They are largely monochromatic in viewpoint and harbor unnatural hubris and disdain for anyone who doesn't look or sound like they do. The average Yale or Duke graduate is the antithesis of well rounded and thoughtful. God help us.
Unfortunately the price is going to rise exponentially to keep the “green” Rube Goldberg machine going. It’s going to get harder to add more renewable energy as the complexity of the grid increases. We now have a variable but fairly known demand supplied by a reliable and controllable supply. As we add more smaller generators with random, variable, uncontrollable supply, the grid complexity will exponentially increase. The way the “green” energy advocates propose dealing with this is by increasing the technological controls over demand and the grid. Virtual Power Plants are a
fancy way of saying grid operators will have the authority to control demand by restricting supply homes & businesses. “Grid modernization” is a fancy way of saying they need new tech to add capability to reroute power from supply to demand over vast distances & geographic areas.
A basis of engineering is to design a machine as simple as possible to do the job. We’re doing the opposite and building a machine as complicated as possible.
What could possibly go wrong with Investor Owned Utilities, using private equity models for returns on investment, in a formerly deregulated market system, now reregulated to support the unsupportable “renewable” goals mandated by people who don’t know a Hertz from a kilowatt. Then to help things move along, the IOU’s taking advantage of the various federal and state tax and production tax incentives and with new assets in the ground, the accelerated deprecation which is part of the debt and equity financial parfait. Add in a dollop of local, state and federal EPA layers on oh, say a small steel foundry in the middle of northern Minnesota and 98 direct employees are out of work. But it’s worse than 98 directs, they are the pebble in the pond. The concentric rings go out to the local tax base, goods and services are affected, the local pizza, gas and convenience store is suddenly down 20% in sales and revenues, and their electricity bill is rising. One question that came to mind immediately was, the possibility of cogeneration for the foundry operation, the Hell with the IOU, if there were natural gas close by, could they have figured out an energy balance for the steam that came off the generator, or could a simple cycle unit give them the juice they needed to stay in operation. The firm sounds like it is run by smart people who likely ran the traps and came up,with three lemons, so time to leave the casino. But still a question nonetheless.
It won’t stop until the residents of Minneapolis St. Paul are sitting in the very cold and dark of a prolonged blackout in the middle of the coldest January in recorded weather history. Beijing 1994? Tens of thousands of small coal bricks firing the in house coal burners for heat and cooking? Just saying when you’re cold and hungry lots of scenarios seem possible.
Minnesotans ought not feel too bad, the unions, politicians, regulators, greedy investors and the dumbest senior management in the history of man, ran the once thriving pulp and paper business right out of Maine. 21 million acres of land, 19 million acres of mostly timber, 1.3 million residents, 90% of whom live within 20 miles the sea, again what could go wrong when the state’s land mass is 95% devoid of human interaction? So cheer up Hibbing, things could be worse! Oh you did cheer up? What? Things got worse?.. oh well….
My recent conversations on LinkedIn about Mitch Rolling's recent post come to mind. When crossing swords with a avid renewable supporter, they will always pull that the Midwest states are mostly wind have the lowest rates out of their playbook. What they skip over is which states have 100% mandated green energy and that effect on rates. While it's true the renewable subsidies are effecting reliability everywhere, their upward pressure on energy prices has been muted (for now) in fully competitive markets. Your article does an eloquent job of showing what happens as soon as a state jumps on the green train. It should create quite a stir on LinkedIn.
Great comment. On their Q4 2023 earnings call, Minnesota Power's CFO told an analyst to expect 14% compound annual growth in their regulated rate base from their ability to spend billions on unreliable renewables despite flat kwh sales - a staggering sum for ratepayers.
https://seekingalpha.com/article/4671648-allete-inc-ale-q4-2023-earnings-call-transcript
Tanner Di Lello
Understood. Thanks. And then, having rolled the EPS guide to base your 2025, is there a long-term rate based CAGR guide over the same period? I'm just kind of looking at this in reference to the prior 11% rate base CAGR guide that used 2022 as a base?
Steve Morris
Yeah. It's up a little bit. It’s probably closer to 14%.
There is a enabling element fot profit taking by investor owned utilities than needs to be taken into account. Green regulation provides a excellent opportunity to rake in additional profits and blame them on new regulations. I sent this article to Isaac this morning.
https://abc7news.com/pge-rate-increase-2023-earning-2-billion-dollar-profit/14483425/
Exactly. We’re working on an article called “Greenplating the Grid” that looks at this in depth. I’ve heard stories of utilities being accused of gold plating their grids in the past. Do you have any good resources detailing this so we have more historical context?
Isaac Iwould research CPUC rate cases and associated news over the last 5 to ten years. All three big IOUs in California have been on the rate increase gravy train for a while now. The tatic has been small regular bites every four to six months rather than a massive step. Present Day I would watch DTE and the big New York IOUs to start similar activity. It will be small but frequent. The best way to boil a frog ....
With 3 of MTIs other 5 plants being in Michigan, how long before those 3 close also leaving one remaining plant in Indiana and one in Mexico?
my guess is they will build some more in Mexico
Great piece by the Energy Bad Boys.
I have to say - kudos on the music - love it - great approach to what could be a somewhat mundane subject for some!
Also love the reading section. Keeping us well educated one substack at time!
Living in rural Texas - I can say you are right about the jobs front and manufacturing, but also the dairy industry here in our area - I have seen their electric bills and it is a oh my moment! We have a few manufacturing facilities and they do hire so many of our workers with well paying jobs, we cannot afford to loose those facilities.
We are lucky to have reasonable electric rates, so far, but as the push for more and more renewables and the drive for the favored battery storage intensifies I am afraid that will not last long and they will go up, hurting so many of our older and disadvantaged populations.
So to sum up - it is not all blue states chasing the green dream - here in red Texas (for now) we are hurtling over the cliff too. The new economic development bill JETI - has attracted only a few applications from what I understand, now that renewables are out of the picture (yeah!), and I am hoping that more industry will come to Texas to help support our rural communities as our populations grow exponentially.
Once again thanks for a great article!
Thanks JF! I grew up on a dairy farm in a manufacturing town so this is personal for me too. Plenty of red states are also foolishly allowing utilities to shut down their coal plants and build unreliable generators
https://www.telegraph.co.uk/news/2024/01/20/climate-change-wind-farms-royal-society-green-energy/
In the UK the Royal Society has called out the risks of relying on renewable with insufficient backup. Using weather from 37 years rather than a single good year the Royal Society flagged a requirement for 100 TWh of storage to get through multi-year low renewable generation.
Like so many post industrial towns in North America, survival is bought with yesterday’s saving.
Again way to hit it out the park!
Much noise has been made about the deindustrialization that is taken place in Germany and countries like it. However I would point out that we have since what a deindustrialization looks like in the United States, it's called the Rust Belt, at one time the industrial heartland of the country given it's proximity to ports, Candia, and the Northeast via the Great Lakes and cannels. Rust belt is defined by deindustrialization, economic decline, population loss, and urban decay on these regions. Starting in the 50s the declining in "energy intensive" industrial sector began bleeding from the area and has never recovered. Steelmaking, automobile manufacturing, and coal mining left the region for "greener pastures-pun intended", mostly to other countries like China, Vietnam, & Indian for Steel, cement, & chemicals. China & Mexico for automobiles. Taiwan, South Korea, & China for chips.
Now given the size and regional differences in the United States a lot of the deindustrialization for us is regional more than national. The south and southwest was consider by the more developed norther states as frontier or emerging markets given lack of population, infrastructure, education, & lax government regulations to respects to environment so many of our industries just moved south (automobiles to Alabama, Georgia, & South Carolina) or southwest (Semi conductors). So while some regions deindustrialization others where industrialization. This was just a musical chair from GDP perspective and masked the issues.
What is the common theme here? Higher labor cost, increase taxes & regulation, and ENERGY forced the move from the Rust Belt region to the South and Southwest. And now that these areas have been experiencing the same issues we saw the move overseas.
To demonstrate how important energy is to these equation, one can make the argument that without the Hoover Dam supplying low cost hydro power, the Semi Conductor industry would not have been able to developed or the United States is the home to crypto mining mainly because or cheap natural gas-other factors of course play into this however, the main contributing factor is cheap energy.
Not to sound insensitive, but 91 jobs is not a lot. Also, if people risked life and limb to travel to the New World or to the Western territories from the Eastern US, hundreds of years ago, is it too much to ask that someone travel by car or airplane to a new job?
Hi Spencer, the main point we were trying to me is that this is just the beginning and the high cost of electricity for facilities like this will cause more places to close down too.
Make*
While the thesis of this essay is interesting in its own right, I have to comment on two of your suggested readings; those by Travis Fisher and Nick Pope.
As Travis Fisher argues, with eight billion people hoping to share in the benefits of modern life, the externalities of modernity are vital considerations. As a tool of such analysis, though, the social cost of carbon (SCC) is pretty flawed because the long time line makes the discount rate assumed in its benefit/cost calculation the biggest fudge-factor one can imagine. It renders all other considerations practically meaningless. To arrive at a robust result, modestly indifferent to discount rate, the costs have to be unbearably large and benefits near term. No one can imagine anything that reasonably fits the bill.
Nick Pope demonstrates how the Biden Administration is playing games with the implementation of ruinous carbon policies to make sure the bad tasting medicine doesn't upset their electoral needs. In a way this is like fiddling with discount rates, but it is also similar to what utilities are doing with respect to their integrated resource plans (IRPs). Compare recent IRPs to their predecessors to see the utilities constantly stretching out the bad news inherent to this energy transition. Is this because they, themselves, are slowly becoming aware of problems, or that they have been aware all along and are trying to avoid awakening utility regulators too early?
I think your last question is exactly right. The utilities know the wind and solar experiment will fail but they will get to bilk ratepayers multiple times before they wise up and the utilities ultimately invest in nuclear power.
BTW that big dot in Ohio is less than five miles from my home.
400 years ago Pope Urban VIII and his Inquisition declared that Earth was the stationary center of the universe – deniers will be drawn and quartered – Bruno.
An equivalent UN global warming cabal has currently declared the GHE with 0.04% CO2 are the atmospheric control knob which mankind, as the fixed center of the globe, is catastrophically warming - denier’s careers will be drawn and quartered – Soon.
The two are cut from the same bogus cloth.
“E pur si muove.”
1. Earth is cooler with the atmosphere, water vapor and its 30% albedo not 33 C warmer as the GHE claims. https://youtu.be/Ld0aplwo1hI
2. The ever-popular GHE power flux/heat balance/budget graphics don't balance plus they violate the LoT. (Yes, they REALLY^3 do!!) https://youtu.be/KZnMXNxux8s
3. The kinetic heat transfer processes (Conduction, Convection, Advection, Latent) of the contiguous atmospheric molecules render the “extra” energy of a near Black Body surface impossible. A system’s temperature is a function of the kinetic processes, radiation is a function of that temperature and follows those kinetic processes. As demonstrated by experiment, the gold standard of classical science. https://principia-scientific.org/debunking-the-greenhouse-gas-theory-with-a-boiling-water-pot/
Since both GHE & CAGW climate “science” are indefensible rubbish alarmists must resort to fear mongering lies, lawsuits, censorship and violence.
Poorly educated but diploma'ed urbanites are the death of civilization. They are largely monochromatic in viewpoint and harbor unnatural hubris and disdain for anyone who doesn't look or sound like they do. The average Yale or Duke graduate is the antithesis of well rounded and thoughtful. God help us.
Unfortunately the price is going to rise exponentially to keep the “green” Rube Goldberg machine going. It’s going to get harder to add more renewable energy as the complexity of the grid increases. We now have a variable but fairly known demand supplied by a reliable and controllable supply. As we add more smaller generators with random, variable, uncontrollable supply, the grid complexity will exponentially increase. The way the “green” energy advocates propose dealing with this is by increasing the technological controls over demand and the grid. Virtual Power Plants are a
fancy way of saying grid operators will have the authority to control demand by restricting supply homes & businesses. “Grid modernization” is a fancy way of saying they need new tech to add capability to reroute power from supply to demand over vast distances & geographic areas.
A basis of engineering is to design a machine as simple as possible to do the job. We’re doing the opposite and building a machine as complicated as possible.
What could possibly go wrong with Investor Owned Utilities, using private equity models for returns on investment, in a formerly deregulated market system, now reregulated to support the unsupportable “renewable” goals mandated by people who don’t know a Hertz from a kilowatt. Then to help things move along, the IOU’s taking advantage of the various federal and state tax and production tax incentives and with new assets in the ground, the accelerated deprecation which is part of the debt and equity financial parfait. Add in a dollop of local, state and federal EPA layers on oh, say a small steel foundry in the middle of northern Minnesota and 98 direct employees are out of work. But it’s worse than 98 directs, they are the pebble in the pond. The concentric rings go out to the local tax base, goods and services are affected, the local pizza, gas and convenience store is suddenly down 20% in sales and revenues, and their electricity bill is rising. One question that came to mind immediately was, the possibility of cogeneration for the foundry operation, the Hell with the IOU, if there were natural gas close by, could they have figured out an energy balance for the steam that came off the generator, or could a simple cycle unit give them the juice they needed to stay in operation. The firm sounds like it is run by smart people who likely ran the traps and came up,with three lemons, so time to leave the casino. But still a question nonetheless.
It won’t stop until the residents of Minneapolis St. Paul are sitting in the very cold and dark of a prolonged blackout in the middle of the coldest January in recorded weather history. Beijing 1994? Tens of thousands of small coal bricks firing the in house coal burners for heat and cooking? Just saying when you’re cold and hungry lots of scenarios seem possible.
Minnesotans ought not feel too bad, the unions, politicians, regulators, greedy investors and the dumbest senior management in the history of man, ran the once thriving pulp and paper business right out of Maine. 21 million acres of land, 19 million acres of mostly timber, 1.3 million residents, 90% of whom live within 20 miles the sea, again what could go wrong when the state’s land mass is 95% devoid of human interaction? So cheer up Hibbing, things could be worse! Oh you did cheer up? What? Things got worse?.. oh well….