Purposeful price pumping by constraining supply

James Conca recently published a commentary on Forbes titled Closing Vermont Nuclear Bad Business For Everyone.

A major thrust of Conca’s initial post was highlighting the rapidly rising prices of electricity in New England that are being driven by an increasing reliance on natural gas as reliable power generators like the Vermont Yankee nuclear plant and the Brayton Point coal plant are being encouraged to shut down by a number of activist campaigns and political actions. Meredith Angwin at Yes Vermont Yankee published a post titled Soaring Prices in New England: An Update that includes additional details about the recently announced price increases and the ones that have not yet been announced.

Those electricity price increases are going to hurt all consumers and most businesses, but the pain will be greatest on those who can least afford to take corrective action. Businesses that sell or transport natural gas, produce equipment associated with burning natural gas, supply the wind and solar industry or build transmission lines will probably book increases in revenue that significantly outweigh their increased power bills.

Many consumers and businesses are going to be uncomfortably surprised; their elected and appointed leaders didn’t mention the costly effect that closing nuclear and coal plants would have on electricity prices. Many of them purposely obscured the effect that closing emission-free nuclear would have on the environment.

Conca’s article has attracted an active comment thread that is worth reading. One particular segment of the comment thread offers a clear view of a disturbing response to Conca’s concerns about higher power prices that deserves its own discussion. That segment starts with the following comment:

Beta Blocker

As a practical matter, there is no other way to achieve significant near-term reductions in US carbon emissions but to greatly reduce demand for energy in all of its forms. In turn, there is no other practical way to enforce these energy conservation measures except through policies which significantly raise the price of energy, including the price of electricity.

Constraining the supply of energy is one very effective means of raising its price. The US Northeast has chosen the pathway of enforced energy conservation as its primary energy management policy. Its conservation enforcement approach is being implemented through a series of environmental and regulatory policies which will inevitably result in ever-rising energy prices, which will in turn significantly dampen industrial and consumer demand for energy in the region.

The hard reality which we have to face is that providing cheap electricity to industry and to the public simply feeds a wasteful energy consumption monster. Unless energy prices rise significantly, forcing large changes in America’s energy consumption habits, it will not be possible to transform the American economy in ways that will make it truly sustainable for the long-term future.

The US Northeast and the US West Coast are the first major geographical regions in the United States whose political leadership clearly understands that if the American economy is to be transformed in ways that will greatly reduce its wasteful use of energy, the only approach that can possibly work is to raise the price of energy in all of its forms, thus making energy conservation not only an option, but a necessity.

People who have been following the energy discussion for many years will recognize that this philosophy has its gurus in people like Paul Ehrich and Amory Lovins who have produced several pithy quotes about the hazards of developing clean, abundant sources of power and making them readily available to average people. The energy conservation gurus like high energy prices because price serves as a way to ration power, which is apparently a product that the elitist gurus think most people should not have.

Another commenter supplied a response that is not uncommon among some participants in energy discussions.

Joshua Gower

“As a practical matter, there is no other way to achieve significant near-term reductions in US carbon emissions but to greatly reduce demand for energy in all of its forms.”

I can think of another way to significantly reduce US carbon emissions in the near term. Don’t shut down generating stations that produce base load electricity with zero carbon emissions.

I appreciate the noble ideals of the rest of your post but if purposely raising electricity prices to achieve reduced carbon emissions is your goal, shouldn’t you start by reducing the supply of carbon emitting sources?

In my opinion, Mr. Gower is being far too kind by crediting Beta Blocker with noble ideals. Raising prices for electricity, a vital commodity that is virtually impossible to live without in a modern environment, is not a noble goal; it is an elitist objective that will inevitably make life more difficult for people who are already struggling to make ends meet in a rather unsympathetic economy full of lowered expectations. Beta Blocker doubled down with the following comment:

Beta Blocker

Joshua Gower, the only way to guarantee that energy conservation measures are diligently pursued in this country is to make energy a very precious and expensive commodity.

If this means sacrificing low cost energy resources in the short term as one highly effective means of squeezing out wasteful energy consumption habits on the demand side of the equation, that is what has to be done.

Once base load demand for electricity has been significantly reduced through a combination of high electricity prices and government-imposed restrictions on expanded electricity production, the renewables will then have a much easier time of it competing against fossil fuel sources of electricity, primarily natural gas.

Regardless of what they might say publicly about why they are raising energy prices and are eliminating low-cost sources of electrical energy, reducing base load demand is what the political leadership in the US Northeast has to do in order to build a lasting foundation for going forward with the renewables.

Making these kinds of tough short-term decisions is the only practical way in which America’s total carbon emissions can be permanently reduced for the long term.

A skeptical part of me hopes that Beta Blocker’s comments are satire aimed at opening eyes so we can make progress on goals that align with my mission of abundant clean power for people, but I fear that the person writing that comment might have been completely serious about his ultimate objective.

Here is the comment I posted notifying Beta that I intended to start a new conversation based on his clear statements of intended purpose.

Rod Adams

Beta Blocker:

Thank you for stating your motive and end goals so clearly. I just wish you had been willing to post that comment under your real name.

Even if you are sincerely motivated and believe that higher prices will achieve the emissions reductions you desire, have you thought a little more deeply about the people who will receive enormous benefits from your actions?

An energy market with a supply that is constrained enough to result in higher sales prices generates massive cash flows directly into the pockets of the remaining suppliers. The multinational petroleum companies that supply most of the nation’s natural gas will be raking in the dough under the system that you want to impose. So will companies that own the pipelines, speculators trading on Wall St., and companies that are fracking the heck out of rural Pennsylvania and trying to do the same to New York.

Those companies are run by people who have excellent math skills and a keen understanding of the role of supply and demand. I am quite certain that they will applaud your efforts and supply continuing donations to the “non-profit” groups that adhere to your mission statement.

Coal, oil and gas interests have been funding the opposition to nuclear energy for at least 50 years because the thing that scares fossil fuel interests the most is energy abundance that drives prices down and reduces their profits to levels where they “just get by.”

I’m planning to copy your comments and produce a post on Atomic Insights later today to try to help a few more people understand exactly who they are working for if they take actions motivated by your philosophy of constraining supply to achieve emissions reductions.

Rod Adams
Publisher, Atomic Insights
Host and producer, the Atomic Show podcast

I hope many of you have thoughts to share.


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