June 1, 2010 - market theory of policy, and the madness of crowds; FPL's 75 MW solar thermal

BP shares are taking a hit today. One estimate suggests BP has lost $50 billion in market value based on share price. Meanwhile, another estimate suggests the true cost to BP of the massive oil release from its Deepwater Horizon well is on the order of $20 billion.

From the policy level, it's interesting to observe the market perform its assessment of BP's liabilities. If the large-cap stock market is the product of the "madness of crowds", what is the gap between share price and true value? How does the size of this gap vary with time and conditions?

This inquiry has implications for the policy world as well. What is the absolute value, in economic or preferential terms, of a given policy outcome -- for example, affordable electricity, or reduced CO2 emissions? How does society value that policy outcome? What is the size of the gap between the value we place on an outcome, and its true value? What choices should we as a society be making that we don't find "worth it", but that are truly the lowest-cost and best path forward?



More grid-scale solar: FPL is building a massive solar thermal plant near Lake Okeechobee, Florida. At up to 75 MW, FPL's Martin Next Generation Solar Energy Center is on track to be the second-largest solar plant in the world. This solar thermal plant has a unique design. The plant will use mirrors to concentrate the sunlight 80 times, and then heat water up to 700 degrees. To get over the limitations of Florida's humid and often cloudy weather, the Martin facility is unique because it is co-located with an energy campus that already has 13 oil and gas-fueled generators. The heat exhaust steam from four natural-gas generators will be combined with the solar plant's steam to spin an existing generator. This saves the significant capital cost of installing a new generator, and seems like an efficient use of existing untapped capacity.

What's the cost? About $420 million, or about 16 cents a month to the average FPL residential bill.

May 27, 2010 - TransCanada sues Massachusetts over local aspect of renewable portfolio standard

In Massachusetts: TransCanada has sued the Commonwealth (and named officials) over the Green Communities Act. Specifically, TransCanada is asserting that the statute's requirement that utilities enter into long-term contracts to buy power from Massachusetts generators including local solar PV projects is unconstitutional. TransCanada claims that this discrimination against out-of-state renewable energy producers not only violates the Commerce Clause of the US Constitution, but results in higher prices to ratepayers. The New England Power Generators Association agrees that it is illogical to insist that clean energy originate locally, given our regional transmission grid and unpredictable electron flows.

Massachusetts Attorney General Martha Coakley is trying to negotiate a settlement with TransCanada.

Interestingly, TransCanada is challenging the Green Communities Act: the same statutory framework into which the Cape Wind contract with National Grid fits.

Are electrons a fungible commodity? Are the electrons produced by a renewable project inherently more valuable than electrons produced by (for example) coal-fired generation? Even if they are, doesn't the great mixing bowl that is the transmission grid eliminate any uniqueness those renewable electrons had? Is there any real meaning to the kind of financial (contractual) fictions that Consumer A is buying Generator B's renewable electrons?


Weather news: NOAA predicts an "active" to "extremely active" hurricane season this year, with between 14 and 23 named storms forming in the Atlantic Ocean, Caribbean Sea and Gulf of Mexico.

BP's top kill of the Deepwater Horizon oil well appears to have worked.