Government Incentives in Energy Production

EconBuff Podcast #20 with Patricia Papachristou

Dr. Patricia Papachristou talks with me about energy production. Dr. Papachristou gives her thoughts on the way governments are incentivizing different sources of energy production. We discuss the growth of the technology and the reductions in cost of production in renewable energy sources. We explore the subsidies given to fossil fuels, and Dr. Papachristou explains that costs go up over time with extractive energy sources but do not with renewables. Dr. Papachristou argues creative destruction is at play as we see renewables pushing out traditional sources of energy production, and that the low per unit costs of production with renewables is the driving force. Finally, we discuss the different kinds of renewable sources and we explore how Dr. Papachristou views the future of renewable energy.

Photo by Cameron Venti on Unsplash

Transcript

Stitzel: Hello and Welcome to The EconBuff Podcast. I'm your host Lee Stitzel. With me today is Patricia Papachristou of Christian Brothers University. She's a professor of Research of Economics they're interested in Environmental and Natural Resource issues. Pat, welcome.

Papachristou: Well, it's great to be here.

Stitzel: So Pat, our topic today is the government's role in energy production. And so I'd like you to just start us off with, sort of, an overview and how you see government incentives and environmental issues --- specifically with energy production.

Papachristou: O.K. well, you know, the first thing, I think, that's important to notice is how, you know, the government has done a lot of things to help, obviously, the fossil fuel industry when it needed it; and it is still helping the fossil fuel industry in an unbelievable way at this point. When we know how bad it is for the environment in terms of how much burning fossil fuels is responsible for the greenhouse gases, and the smog, and a lot of other problems, as well as health problems. To me, these subsidies that they're still getting [that is] like over $500 billion dollars of direct subsidies --- [they] don't make any sense given the money there, you know? You know, several years ago they were very profitable. And so why we still continue to give them all this money when they're destroying our environment [and] our health doesn't make any sense to me. And they give so much more to the fossil fuel industry than they do to renewable energy. So, you know, at this point it's interesting. The energy situation [currently] is that, you know, they have done some good research with regard to solar and various other things. And at this point, solar is able to compete on its own now; [whereas it] doesn't really need those subsidies anymore [because] the market price is cheaper than you can produce than using coal.

Stitzel: Yeah. You brought up a couple of really awesome points. And I'm extremely interested in those two points that you brought up there at the end. Because, I think, most people [would respond] if you said: what's the nature of subsidies; [then they], like, would say: well, obviously renewables are getting more subsidy than fossil fuels. And you're saying that's not true. Do I have that right?

Papachristou: That’s not true at all though.

Stitzel: Yeah. Wow that's interesting. So, you mentioned what --- $500 billion a year from the U.S. government? Or is that from all levels of?

Papachristou: So, no. That's not all of them. You know, what's interesting to me is many of the countries abroad have cut their subsidies to coal, and as a result --- some have done it completely, but Germany cut theirs in half and --- they saw a 42% decline in demand for coal, as a result of reducing that subsidy.

Stitzel: Right.

Papachristou: Because the problem is [that] we call ourselves a market system, but the subsidies really result in false decisions being made based on the incorrect market price.

Stitzel: That's awesome.

Papachristou: And that is the heart. You know, it just goes --- it should go against our, you know, goes --- against what the pricing system is supposed to be doing for us [and that is] showing what are the best given estimate of our opportunity costs. And obviously, if you subsidize them by that much, [then] it's a major disruption in the market, in terms of the business decisions that people make, [and] in terms of their investing, because it looks like they get a whole lot more out of coal. And with the subsidies, they do.

Stitzel: Let me go back just a little bit. So, when you say fossil fuel, I don't know why, but I it didn't immediately jump out to me that we were talking coal, right? Because I think for the average observer, for especially for a non-environmental economist, [when] you say fossil fuel, [then] we start thinking about gas that goes in cars. So, when you say fossil fuel which energy sources are you talking about?

Papachristou: O.K. so that's a good point. So generally, you know, at one point 50% percent of our energy was produced by coal. And so, I normally think of it as my number one thing. And it contributes like for two-thirds of the greenhouse gas emissions coal is responsible. But obviously, oil does some of that as well. And in the Northeast, you still use a lot of oil to heat homes. But with solar now, even places in the Northeast [like] New Jersey and New York are using solar; because, you know, it's now cheaper than what it was before. Even before then they did give (governments gave) incentives and had portfolio standards where they said: oh well, you have to (New York said oh you have to) get at 10% least of your energy from renewables. And every time they get close to it, they increase it like 25% percent, I think, it was when Pataki was in charge of New York (the governor of New York). So as a result of that, and how much the technology has [regarding] the gains [and] the lower costs, you know --- it's [like] one of those things with manufacturing. The more you produce you get economies of scale. So, we're certainly in the area of increasing returns to scale with our renewable energy; where the/when you extract things it/you have more and more costs. The costs go up. And even with fracking, everybody thinks it's so, you know, so cheap now. They're just running to stay in place, because it's --- they use an awful lot of water and chemicals to get to get the, oh, the oil out and the methane out from the natural gas. And so, it'll be good for a while, but it can't compete with solar and wind now. I mean, solar is down to less than three cents a kilowatt hour. So, and it will continue to get down. So, we/the marginal cost will possibly be close to zero by the, you know, another five years. So, it is just amazing. And now, more and more people are realizing it, and they're looking at people like Warren Buffett, who vested in Mid-Continent Power Plant. And one of the big things he's doing with it is making it even more solar. And, you know, it's supposed to be like 576 megawatts in 2020. So, we're already there. And with that type of scale, he's going to be producing, you know, he's gonna be producing energy at, probably, two cents a kilowatt hour.

Stitzel: O.K. So, give us a little bit of context on that, because I don't think we know…

Papachristou: O.K.

Stitzel:…off the top of our head, three cents kilowatt hour. So, if I'm, you know, an average consumer, you know, in Texas or Tennessee or something.

Papachristou: O.K. So, what's going on --- and some of those figures is how much has come down so much. And I had that down. And it's like --- it's come down. Where did that go? Well basically, if I were to try to find the right spot.

Stitzel: Plus, I I'm not trying to.

Papachristou: Dubai is doing a lot of this, and Dubai has [because] in 2016 their price had come down to 4.6 cents. But, and currently they're doing 85; [meaning] they have 85 gigawatts of power installed. And what's going on now is [that] people expect [the price] to come down. And that was without any subsidies with all in Dubai. And now it's come down, you know, probably about three cents there.

Stitzel: Wow. So tell me if I have this right. If you're in Texas --- which that's where I'm at, so those are the numbers that I would look at --- you're looking at something in like 10 or 12 cents a kilowatt hour for electrical production? Is that right?

Papachristou: Residential price is that.

Stitzel: O.K.

Papachristou: But at Georgetown, Texas it's what? They signed a contract a couple years ago for 3.5 cents.

Stitzel: For is that for commercial [or] industrial?

Papachristou: They were buying it in the open market, you know.

Stitzel: Got it.

Papachristou: I was supposed to be about 100 miles north of Austin, and the price that they are --- Georgetown, Kentucky's 100% renewable energy --- they buy it on the open market for about 3.5 cents. That's their contract, and then they sell it probably for, you know, nine cents more. I mean, not a total, [but] maybe of nine [to] ten cents [more].

Stitzel: And that's them buying coal produced electricity?

Papachristou: No. They're not buying that anymore. They're 100% renewable in Georgetown.

Stitzel: So if I'm a --- if I'm a city that's producing with coal. Like ...?

Papachristou: Oh well. The list price is probably about 12 cents, but that does include all the damage done to the environment and everything else. And that study that Paul Epstein did at The Global Health Center at Harvard says it would add another, at least, 17 cents to the price of coal --- if you included the environmental damage done to Appalachia, and the health issues that are involved --- in terms of the number of deaths, and lung disease, and all the rest of that stuff.

Stitzel: So let's unpack that a little bit. Because you've gotten into, I think, one of the most important things that we can talk about in this topic. And I've got a couple of things I, kind of, want to go back to, because you said some phenomenally interesting things in the last few minutes. But since we're right on this topic, talk to us a little bit about externalities, and sort of, our Econ 101 approach to costs --- that are not borne by the people that are involved in the transaction directly --- and why we might want to have coal prices actually reflect their total cost to the society.

Papachristou: All right. So that is, to me, one of the best illustrations of negative externalities is [that reveals] what happens when companies [are] able to push (what should be) their costs onto society; [whereby] being able to pollute the air the streams and the soil without any consequence. And it's amazing to me how they don't want it published, in terms, of how bad it is. And there was an interesting article this week about how oil companies, for years, have known how bad this was. And falsely, the coal industry as well, especially, had embedded people to form groups at the grassroots to champion continuation of clean coal --- when there's nothing clean about clean coal.

Stitzel: Hmm mmm.

Papachristou: And so again, it's, kind of, perverse that we're/our government [is] subsidizing it, [and] the energy industry is using those subsidies; [whereas the energy industry is] making lots of money, and it's to the detriment of the people in a democracy. So again, it's like --- why should people have to bear the cost of what appears to be cheap electricity? But now with solar/wind, it's not even cheap anymore, and it's doing all this damage, so it's a great example of those negative externalities. [Whereas] you could turn [the ship] around [to], say, [use] renewable energy [that] has all those positive externalities; [meaning] in terms of once you build the power plant with (this whether it's) wind turbines or solar cells, [then] your cost will be zero. Your marginal cost [of] producing will be zero because you will be free. And you will not be sending train loads full of coal to be burned --- like they do in Memphis, up until two years ago, they burned 7,200 tons of coal a day.

Stitzel: That’s an incredible amount.

Papachristou: It’s amazing. A day. And TVA [Tennessee Valley Authority] had no plans. They always would pay the fine instead of putting on scrubbers to clean it. And they basically, when they could have with George Bush, they expanded their energy 16%. They weren't supposed to expand their size of what they were producing. They could renovate. But they increased output 16% during that time, and, you know, we all got more pollution. And so again, it was those. The Sierra Club that had a suit against it, and as a result, they eventually had to close it down. But they pulled it out as long as possible. And so again, it seems perverse for citizens in a democracy, to have what is best for most people, not being pursued.

Stitzel: So let me share a small anecdote, and then summarize, and get your thoughts. So, the first thing I would say [is that] you were talking about the volume of coal that's going there in Memphis. Here at West Texas A&M --- we're in Canyon, Texas --- there's a train track just north of campus. And the, I guess, folklore (if you will) is that the train that we average [is] a train every seven minutes. And those are coal trains going to power plants. I mean, it's just an unfathomable number. But so, what you're telling us is [that] there's these external costs, and you mentioned, I think, mostly health, but also extractive environmental costs. And so, prices should actually be higher. But instead of enacting a tax --- hopefully a Pigouvian tax, right, would/that would actually correct that to some degree --- not only are we not doing that, [but] we're actually subsidizing. And so, people are making choices, based on what electricity they produce and consume, off prices --- that not only do they not reflect the total cost of production, as you said --- [where] producers should be bearing some of that cost. Their costs are actually, artificially lower than they ought to be, even if we were ignoring those external costs. But just the cost directly to themselves is being subsidized. Do I have that right there?

Papachristou: That's right. That's exactly right. And it's just --- I just can't believe. It's [that] the subsidies are so huge, and the damage is so high, and nobody complains, and you can't get anything passed to change it.

Stitzel: So, if you and I are making policy on this front --- we would say there's these costs from extractive sources like coal [which are] health costs [and] environmental costs. And what we would want to do is have the businesses making a decision on how much they produce, by actually reflecting that in the prices that they face, in terms of their input costs.

Papachristou: Right.

Stitzel: And so, we would say [that] it's not that we would want to ban coal production tomorrow. We would just like the choices, like you said, [of] opportunity cost; [because] that's the idea at play here, of all the opportunity costs, [and] the total burden to society being reflected in the choices that they're making. But you mentioned that costs go up with extraction. So, for here in Texas, we're familiar with fracking. If you want to describe some of that as a production process, [then] of course the two big innovations lately in oil production are fracking, and then of course horizontal drilling (which are related). You talked about some of the chemicals there. So, for those of us that aren't familiar, maybe, with oil and coal production, [then] talk to us about why it is that costs go up with extractive energy production resources.

Papachristou: O.K. And so, I think that the key thing is if you have, you know (if you think you have), a well, [as] the more you take out the well, [then] usually it's hard to get stuff lower down. And in order to get, you know, the oil lower down, and what they, you know, they can use chemicals. And that's how they started doing this, you know. And it will get the/what was on the bottom [of the] well up. And If oil was, you know, $15 a barrel, [then] it wasn't worth doing. But when oil got to be, you know, $50-$60-$70, they started doing the horizontal drilling, and using a lot of pressure to get that oil up, and it worked pretty well. And now what they're doing is kind of applying the same to the technique to fracking and hydraulic fracturing; [whereas] you look at/you breakup shell, and you are able to use lots and lots of water and chemicals to get that up, and [then you] sell that heavy oil. It's not like that West Texas crude that you like to sell, you know. It's just really thick stuff that's like peanut butter…

Stitzel: Hmm mmm.

Papachristou:…that you need to have, you know, chemicals to liquefy it [and] to take it out. And that's why it's so hard to push through pipelines, that the DXL pipeline type stuff they're trying to do. They're trying to push that stuff down through older wells [and] older pipes. And when they do, they break and spring leaks like we had a big one in Mayflower, Arkansas. And it was going for several days before anybody admitted that they had one. It leaves out, you know, the fumes where people were wondering what that bad smell was. And it pollutes everything it gets to. And it's like, something like, once it clings to the, you know, the area and the plants and stuff on it, [then] you can't get it off. And so, there's all that damage. So, there's damage from pipe leaks. There's damage from, you know --- I'm going to call in the coal industry. You extract it, but you burn it, and then you have the sludge left over. You put it in a pond. And of course, there's no rule that says you have to line the pond with anything. So, it leaches into the soil and contaminates groundwater. Same type of thing that happens when you do this fracking. You have all those chemicals you put down the well, and they leach out and they destroy the Earth around it, and you cannot drink the water. We've had that in Arkansas as well. So, there are a lot of problems that come, [and] that are pushed onto the public. You know, basically the companies will come in and make you a nice offer for whatever they find in the ground; but they don't say anything about the damage they're going to do, [or] if they're responsible for cleaning things up if things go wrong. So again, a lot of people who used to have good wells, it's been polluted now, and they have to come in and buy their water. So, it's --- those are kind of the more negative externalities. But there's no doubt about it. It's made America a net export of energy now.

Stitzel: And who would have guessed that, right?

Papachristou: Who would have guessed that before? Exactly. And but, they really can't keep it up, because it's getting more and more expensive to do in those areas that they've been working in. The prices are going up to do it.

Stitzel: So there's something really interesting about that, right? Because, I think, the economist would say [that] an innovation like hydraulic fracturing/horizontal drilling [with] the kind of chemicals they're talking about, [then] those could be really good things. But whether or not they are worth the cost to use them should be reflected in the choices that consumers and producers are making. And we want the market to determine what those are, and when those prices reflect the actual cost, right? So, you're saying, you know, [that] sometimes there're accidents. There're spills that are pipe breakages. There are just natural costs from doing the type of activities they're doing. Maybe those things are worth it, right? And that's the counterintuitive point that economists want to make, or at least I as an economist…

Papachristou: It may be worth it, but you're not --- nobody is taking them into account is my problem with it.

Stitzel: Correct.

Papachristou: The issue is the government is subsidizing so much. It doesn't have any relationship to how valuable. You can't predict. It makes the price so cheap, [that] it looks like you got a gold coal; where in fact, if you have these other external costs on it, [then] it is really expensive.

Stitzel: So, you/we talked a little bit about fracturing and drilling. Course, those are oil related things. That's obviously energy production, [and] well within the balance [of] what we're talking about. But you've talked a lot about coal. So, talk to me about some of the extractive costs that might go up with coal, because I don't think we have a sense of that.

Papachristou: Well, I guess, right now --- Wyoming. You know, they always talk about the Powder [River] Basin in Wyoming (where is) where most of our coal [comes from]. [Approximately] two-thirds of coal that we have, that even that we export, comes out of there. And it was really interesting to see how in Wyoming, [that] they're closing coal-fired power plants. And where, you know, they've had where (like we talked about) trains used to come in and out all the time there. Now they've finally taken away like four or five locomotives that weren't going anywhere, because they did not have as much coal going out anymore. So again, we're back to the idea that renewable energy, even in Wyoming and right at the tip of the Powder --- southern tip of that Powder Basin Ridges --- they have a done a lot more with solar [and] wind energy. So, wind energy is really big in Wyoming right now. And there's a, you know, people are realizing oh this could provide us a good living now. But, you know, we need to do something else. And some of these people are being trained to put in solar panel installers. And so, it's, kind of, interesting to see it's even in Wyoming happening. And mostly, you know, the book I talked to, you know, like a lot is the one by Tony Seba. And he says these are going to be stranded assets, because in 10 years the cost of renewable energy is going to be down to several hundredths of 1%. It's changing that much. And that is the thing that is so, you know, we take it [that it] sounds so astounding. But, you know, he compares it to the same type of thing that happened with the computer industry; and how we went from going [with] the big mainframes, and to the desktop, and then to this and that. And the cost, you know, keeps going down for transferring information. Well, he says the same thing is happening with definitely with solar much more quickly than anybody thought. That price used to be something like a $100 per kilowatt hour in 1970, and it keeps on going down [and] going down. It's gone down 65% percent, I think, since to 2016. And it's supposed to go down another, actually it was supposed to be 80%, and that was going to go down supposedly another 65% by the end of this decade. So, you know, people know about this. And I was really shocked to read about, you know, I'm going to call Abu Dhabi [UAE] where they have a plan ---they are giving away, what that they want --- to help developing countries by teaching them how to use solar panels (and other, you know, let's say, solar energy into various forms). And they're partnering with the International Renewable Energy Association [IRENA] and The United Nations to do this. They got 20 different countries they're working in. And they go through this process of, you know, $350 million dollars is in their fund. And then they go through showing them what they need to do to become able to have this concentrated solar and various other things. That the price now is when he started --- it used to be more like six cents (5.6 cents I think it was). And people came to him [and] they couldn't believe he could do it that cheaply without any subsidies at all. And as he gets bigger, the prices come down a lot. And they expect to do three cents --- is what they're expecting. And, you know, you talk about that curve. Just like [the] experience curve. Just like they had like Moore's Law. The more you're producing --- the more it gets cheaper and cheaper. It's kind of like magic, you know, a magic thing. So, you know, he's doing it in, you know, Cuba and Argentina and, you know, Islands and Maldives, you know, Togo [and] just various places. And these places have imported the energy, [and] before it was very expensive. But now they're becoming, you know, self-sufficient in energy.

Stitzel: So, I really want to, sort of (no pun intended), drill down into the differences with solar and wind production and talk about some details there. But I can't pass up an opportunity --- you know, the theme of this podcast is finding economic ideas at play in various topics. And you've laid out very eloquently, I think, a picture and this is what we call creative destruction, right? So…

Papachristou: That's right.

Stitzel:…Wyoming’s making coal. And we naturally feel bad as people. We see --- man, those people are in Wyoming --- [they] are living based on coal production. And so, we see a concentrated group of people potentially losing their jobs, and, you know, cities that might change over time. But it's important to remember that that isn't a cost that has no corresponding benefit, right? We have the benefit of creative destruction --- this innovation technology coming along [with] better technology. I think everybody would say [that] if we can do things renewable, right, [it is better for all of us]. I want to live in a world where electricity is produced by sunlight, and the sun comes up every morning and makes us electricity; [whereas] I'm not worried about the environmental effects of my coal production or fracturing. I'd love to put all that behind. I think everybody would. But we're worried about those people in that concentrated area. So, I think it's really important that you highlighted all the different benefits right here in The U.S. The people that are in those areas might transition very well to the energy (the new energy production) that they might, you know, they might be involved in solar panels, or they might be involved in wind turbines. And we're seeing other places where/that's making big impacts. You mentioned The Islands and Abu Dhabi and whatnot. I think that's really important. But and I'd welcome any comments you had about that before I teased one.

Papachristou: So, I think that's really (what I think is real) important --- and some people have done that to decide ahead of time – [is that] they have to work with people who need the retraining and who want to be retrained to do other things. And you definitely can do that. As far as what kind of jobs, you know, there was, you know, The Christian Science Monitor August 31st had a tremendous front page on the coal industry. And [this issue] talked about Wyoming, and how --- it was for, you know --- the handwriting was on the wall, in terms of these jobs are going, and we need to do something now to change things.

Stitzel: Yeah.

Papachristou: And there was one person who had the, you know, actually was selling solar panels, and could sell solar panels for --- like at the time it was like --- $12,000 dollars; [whereas] which seems like a lot these days, given how much they've come down. But and she did train people to put the solar panels up, and that did provide some jobs. So, and beyond that, in terms of what can you do with the people who had those jobs, and the amount of money they made --- many of them made $100,000 dollars a year working in the mines. And there's no -- how many jobs you make $100,000 a year on, and that certainly was one of them. So, I, you know, those people who install those solar panels probably are lucky to make maybe $35,000. And so. I think that’s, you know.

Stitzel: I'm glad you brought that up. And, I think, that is a point. But, you know, one of the things that I'd argue if I teach a principles of macro class (which I'm doing this semester), is the only way for us to have long-term growth --- right, like if you watch the news, [and] all those things that we're arguing about, [and] bickering one policy [after] another, [is] almost all those things are related to short-term fluctuations in business cycles and whatnot; [whereby] in the end, if you want long-term growth --- you have to have productivity gains. And that means producing more with less. To me this is a slam dunk case of producing more with less. You tell me if I'm wrong there. And I'm sure there are some costs --- that maybe we can get into later, that people aren't thinking about with, you know, the --- with renewable production. But to me, this is just a slam dunk case of [the fact that] the world needs to move towards this, if it's if the technology is viable, [and] which is I think the message that you're bringing us today, right?

Papachristou: I mean that's the thing that is so impressive when you --- there was a really interesting YouTube video that Dutch Public Television [VPRO] did. And what was interesting about --- was about 50 minutes, but they really went into a lot of things about --- why China (which has so many engineers are) [is] going gung-ho, and [why they will] review, you know, [and] revise their five-year plan about how much energy they're going to be getting from solar and wind. Solar got big increases. And the whole thing is --- they know about that curve. And the faster they do it, the lower the price gets. And so…

Stitzel: Real quickly.

Papachristou:…that's how.

Stitzel: I'm sorry. I didn't mean to interrupt. When you say curve --- you're talking about something related to economies of scale?

Papachristou: Right.

Stitzel: So.

Papachristou: Think about that long-term average total cost curve that keeps on going down, down, down; and until it never cuts, you know, never cuts over to the horizontal axis. But it's --- yeah, it's --- right there.

Stitzel: So.

Papachristou: For the projecting [students] --- by the end of this, you know, at least by before 2030, it's going to be here.

Stitzel: So, when you say it's going to be here, [do] you mean actually reaching our, sort of, lowest, attainable, long-run, average cost?

Papachristou: It's going to be, you know, according to Tony Seba, it's going to be .0001 or something.

Stitzel: And you're saying that's minimum efficient scale? Or do you have a different idea?

Papachristou: Yeah. I mean, it just looks like it's going on. Yeah.

Stitzel: Hmm mmm. So.

Papachristou: Like where the bend is. Yeah, but it keeps going lower and lower. It's not parallel.

Stitzel: Gotcha. So, for our listeners then, there's an idea in economics called economies of scale. And when we produce more of things at a larger scale, [then] we can do so at lower average cost of production. And that's because we can dedicate technology that should be able to do it more efficiently. And producing a very small number of units of something [that] might have to be done by hand, [and] producing a very large number of them, [then] allows us to have technologies that are focused. It's akin to the specialization idea. And so, what you're arguing is [that] we're moving towards that, with our long-term average costs are falling, as more and more production of these things is happening. So an example of this --- and you can correct me if I'm wrong --- might be if we only need a thousand solar panels a year, [then] the production of that of those might be very expensive, because we have to have specialized equipment. If we're producing a hundred thousand of those, now we can scale up our production process, and the number of units that we're making can go down. And we can have more research put into that, and better, more efficient production. Have I got that idea?

Papachristou: Right. So that's the idea. And, you know, China saw what Germany did. They had, you know, really, they have a lot less sunshine than we have in Memphis. And they get so much more energy from solar voltaic techniques, that they were, you know, they made their own solar panels before. But China came in and they got to make theirs a whole lot cheaper. So again, we're talking about one thing [and that] is making the solar panels themselves. But once you have the solar panels -- you're not --- your marginal cost of reducing energy is close to zero. And nobody can compete with that.

Stitzel: So, there's a movement in China towards this?

Papachristou: Huge. I mean they have they produce 30% percent of the world's renewable energy --- China produces. And they've doubled down to increase it by (they add) 50 gigawatts more to each one of wind and solar for that they want to do [over] the next couple [of] years.

Stitzel: So, let's talk about that. You mentioned the photovoltaic cell. So, what's happening is people are doing research in that, and those are becoming more efficient? Or how is that process?

Papachristou: Yeah. They're also more efficient. They started off with Bell Labs in 1954 with 6% efficiency, and now it's up to 30% efficiency.

Stitzel: And so that's…

Papachristou: It’s huge compared to what it used to be.

Stitzel: And that takes in a certain amount of energy from the sun, and then we get 6% of that in electricity. And now it's taking in the same amount of sun, and we're getting 30%. Is that what you're saying?

Papachristou: That's exactly right. Very good.

Stitzel: Talk to us. Talk to us a little bit about the idea of what some of the limitations [are], right? If when I was thinking about this 10 years ago, you know, they're talking about wind is only viable in the windiest of places; and solar is only viable in the places that have the most sun, and the most consistent sun coverage. So, you hinted at that a second ago, talking about China. Talk to us a little bit about the nature of the progress with the research, and the ability for these to be viable in places that aren't Amarillo, Texas (which is the windiest, sunniest place in the states, you know).

Papachristou: It is. Is It? That’s great.

Stitzel: That's definitely the windiest.

Papachristou: There was a study that was really good, that looked at three different places. And it was, like, California, I think, [and included] some place in Texas, and [also included] Connecticut. And of course, California, you know. Connecticut didn't get much in the way wind, but it did have some enough sun, I guess. But even with those, that study given the changes, it's going to be projected to be successful in just about any environment, because of what they have now in terms of storage. And most people think you've got to do the storage with lithium-ion batteries, and that's what they've used before. That's what Elon Musk uses. But a lot of people are using what they called salt batteries. And the quote “salt batteries” is when you heat salt up to such a high temperature it becomes a liquid at over 500 degrees [Fahrenheit]. And they can store the heat for 15 hours at a time. So, there's a plant in, oh, in what they call Seville Province [Spain] where they can they do this. Gemasolar [concentrated solar plant located in Seville, Spain], actually the way they say the g is like an h, [or] hemisol, is what it is. And it's just fantastic, because that's been the killer. [And that] is that we didn't have a way to store it, but now we can. And now you can have 24-hour solar electricity. So that was a huge one. And now, California has made a bigger one, and it's supposed to be able to store a whole lot more. And this should be operational now, and Google is behind it.

Stitzel: So, this is the idea that coal production can, sort of, be done 24/7. So, it's, kind of, on demand. We can't really store electricity until we came up with the developments that you're talking about. And renewable production tends to be limited to the daytime when it's windier and sunnier. Have I got that right?

Papachristou: Right. But now you can store it and get it anytime you want.

Stitzel: So, can you transport it?

Papachristou: And what they can do then with it is to send it out on wires. Yeah.

Stitzel: So, my listeners are probably all thinking the same thing which is: O.K., but when are they going to be able to do this in Seattle? And maybe the answer is [that] you make it in California and send it to Seattle.

Papachristou: Yeah.

Stitzel: Talk to me about that. Are we ever going to see?

Papachristou: So, one of the things that --- the couple things that --- are interesting to see how they are, you know, how well they play out. We don't really know, but they always used to say: we have to use the problem with wind and solar energy. It produces too much at one time, and we have to have these other things on standby. No! The model now needs to be where you want to use only wind and solar, and we'll fill it in with other things later if we need to. And we got hydro as well that we can use. So, it really changes everything in terms of, you know, you don't really need those nuclear power plants, you know.

Stitzel: So…

Papachristou: At any point they're going to be out of date anyway. But in terms of the changeover is the big deal, and in terms of how much does it cost to build up, you know. The solar's module and it's easy to regulate it. And, you know, when you need it, [then] you can use it. Whatever. So, in the past, that has been the biggest thing. And it seems like every article I used to read, used to talk about how bad it was --- that, you know, you there's nothing you could do with it. So, there are two things that are going on. One is with the molten, you know, these concentrated solar producers --- the CSPs, I guess with towers --- with, you know, glass or mirrors. And they supposed to have one of those in Arizona, you know. So…

Stitzel: I'm not familiar with this idea. Can you explain that to us?

Papachristou: Have you seen them?

Stitzel: I haven't. Explain that to us just a little bit.

Papachristou: O.K. So, they're basically --- they look like a hyperbola, in terms of the glass, and it's supposed to be able to catch more of the sun, and they move to catch it. And they concentrate it in such about that it's so hot, [that] it's able to produce heat-steam and get your energy that way. So that's one big one. But this is what they're using in Abu Dhabi is basically in the desert concentrating it all. And those are the ones who've gotten. You know, Bonnie K. Moon was over there. And he was so shocked that, you know, so surprised at how they're able to do this with no subsidies whatsoever. And with the amount of sun, they got in the desert --- no problem! But again, he/the company (I'm going to say the Abu Dhabi government) is/has done this now for four or five years; [wherefore they have been] going around, [and] working with people all over the world to show them how they can do it, and how it's the technology is already here. There's no problem with it.

Stitzel: So, you alluded to the hydro earlier. I think --- when my listeners are thinking --- about renewables, it's definitely. I'm the same way. I'm thinking about solar. I'm thinking about wind. You mentioned hydro, which obviously I think it's gonna be related to dams. And then.

Papachristou: Right. People used to think of it as, you know, people used to think of hydro as a form of renewable energy, and with dams. And so there's one here that I wanted to check out where they said that the --- oh I'm trying to think of the best way to say this --- solar power now is with these/the concentrations have much more reliable energy than you could get from a hydroelectric power. And they compared it first to The Hoover Dam, then they compared it to Three Gorges Dam, and they said that solar was 72% (where I think The Hoover Dam was 23% and Three Gorges Dam may have been 50%). But this new concentrated one in California is supposed to have efficiency of 72%. So, it's just…

Stitzel: So these solar towers that you're talking about --- the idea is the sunlight comes in, and then the mirrors reflect this in a way that concentrates them? And then you've got solar panels?

Papachristou: That's right. Concentrates that.

Stitzel: O.K. that's a fascinating…

Papachristou:…so they, so what they do then is transfer that so it heats up and provide steam that will turn turbines.

Stitzel: That's interesting.

Papachristou: So, it is…

Stitzel: I'm going to ask you, sort of, a question that puts you a little bit on the spot. And so, I don't want --- I know it's a little bit obscure.

Papachristou: O.K.

Stitzel: I remember seeing when I was in graduate school, [there was] a paper that was comparing the different types of energy production. And I think one of the ones that they mentioned was algae. Are you familiar with where they have algae, and tanks, and the algae reacts to the sunlight? So it's like a different way to capture solar. Is this, are you familiar with?

Papachristou: I haven't heard that one yet.

Stitzel: I think it's a relatively small source. I don't think it's getting the kind of growth that you're talking about with…

Papachristou: So this is what I was trying to talk about. In California near Nevada, they have this generating system. And we're basically looking at concentrating solar thermal. So, it's called Gemasolar. And they're the ones who produced it in Spain, [and] can produce electricity at about 6,400 hours per year, with a capacity factor of 75%. By comparison, Hoover Dam has a capacity factor of about 23%. And China's massive Three Gorges Hydroelectric Power Plant has a capacity of 50%. But…

Stitzel: Spell it.

Papachristou: G-e-m-a and that g is pronounced like an h (hemisola). They're the ones who start over in Seville with a concentrated power. But now they're doing one in California. It's even much bigger than the one that they had done in Spain.

Stitzel: So, when you say those percentages, what are you talking about?

Papachristou: So, we're talking about that's the capacity, the factor capacity it has. So, everybody --- says oh well, you know --- used to say this about The Hoover Dam being so powerful. But, you know, it's only at 23% a capacity with regard to how much energy it can produce. And the Three Gorges Dam --- 50%. And then this Gemasolar is supposed to be 72% percent in terms of how much energy it can produce from those solar, that solar installation, that concentrated power.

Stitzel: So that's like an efficiency measure of energy.

Papachristou: That's what they're calling efficiency measures. Exactly.

Stitzel: O.K. So, I think, that makes a little bit of sense so for our listeners. If they can, they can, kind of, picture the solar tower, [then] I would obviously encourage them to look it up, because it's extremely neat visually.

Papachristou: It is amazing. And so, Google's is this --- is the Gemasolar is 110 megawatt per year. And that it's only 110 megawatts, but because of the concentration, it's able to power 25,000 households.

Stitzel: So, you got a big tower, and the sun's coming, and then it's being reflected in all different directions. And there’re solar panels arrayed around it, at the base of it, for the light to be bounced and reflected [and] concentrated, I assume?

Papachristou: Right.

Stitzel: The process that you're describing happens on the ground.

Papachristou: Happens on the ground. And the other thing is because you have this molten salt, you can store the excess energy at night and use it. So just, that's the thing that makes it so much more effective.

Stitzel: That's very neat.

Papachristou: Hmm mmm.

Stitzel: So, we've got --- we've talked about some of the considerations with solar. And so you're thinking there's probably developments in this path, that's going to get us to a place where this will be viable in a lot of different areas? Because you're saying this is in Nevada? I think you said. Or California?

Papachristou: So that was in California, near Nevada. Yeah.

Stitzel: So, we're thinking of that as a sunny place. You mentioned Arizona. That's sunny. Here in the Amarillo area, we're very sunny. So, what happens if you're somewhere that's not as sunny?

Papachristou: So, remember, you even have Germany who gets so much of their electricity from solar. So, and people rate. They do rate you, just like they do with wind. You know, like, you've seen how strong the winds are in Texas? You know that we got this corridor that goes down from Dakotas all the way down Texas and it's amazing, right? It's like the Saudi Arabia wind going down there.

Stitzel: Hmm mmm.

Papachristou: And so, in terms of being able to produce a lot of energy cheaply, that has no negative externalities on the environment, is a huge win. And that once you --- the solar panels, as well as the wind turbines, last for at least 30 years. And then you can --- you know, the turbines have sensors on them so you --- know something's going wrong with [them], and you can fix it, you know, right? But and you don't have to get rid of the whole lot, you know, all your solar panels. You just have to deal with the ones aren't performing so well.

Stitzel: That brings up an interesting point. So, tell talk to us a little bit about the, sort of, fixed cost comparison. We've talked about the overall total production, and I think that's what matters in terms of the eventual market price that you're facing from these two things. But talk to us a little bit about the [idea that] if you have a sense of the, sort of, fixed cost; because I'm thinking a coal plant, right? So, you gotta, you got a mine, and then you got trains, and then you got a big plant somewhere. And those are, sort of, concentrated. But those are probably each very expensive component parts. So how does that compare to, like, a solar?

Papachristou: So, I mean, that's the beauty of it, you know. When you think about, you're fit compared to a coal producing, you know, the coal plants. I really wish I knew the exact amounts, but I don't. But then we did this big natural gas plant, [in order] to take the place of our coal plant; [consequently] which is good, because natural gas has half of the emissions that coal has. But it also has those emissions. And, you know, a lot of people at the time thought we'd be a whole lot better to [have] done a lot more with solar instead, because the cost would have been a lot less with solar. And you never have to pay for the natural gas that goes up and down. And you never know what the price is going to be. Where these are, the only way these prices are going --- are down. You know, that's the thing that's so amazing. It's just, you know, to me it's just unbelievable. So, I will try, you know, I probably could look at that and get you some better statistics on that of course.

Stitzel: Sure. So, what I want to talk about then --- we've been very positive about the trends in renewable production. Talk to us about some of the potential downsides, or costs, or things that would be unique to it --- for example, if you're building these solar fields, or if you're taking up a bunch of farm area to make wind turbines. You know, I promise you the one of the only things that some of our listeners have heard is that, you know, wind turbines kill birds and stuff like that.

Papachristou: Sure.

Stitzel: Talk to us about some of those other potential costs, because I am taking up a field, if I'm doing one of these solar towers like you're talking about. Of course, I think a lot of your solar panels might be able to put on individual houses. That would be a really neat adaptation too. If you're driving around in the Texas Panhandle, especially if you head south down towards Abilene, [then] you're going to see these big wind farms. People say they're an eyesore. If I'm going to get the best wind, I might have to put them up on top of a hill, and maybe that reduces the quality of the view. Talk to us about some of the external costs, or just cost in general downsides to…

Papachristou: O.K. So, if we had to talk about some costs. Some people --- they don't like the way it looks. But, you know, I grew up with telephone poles all over the place and power lines. And so, the first time I saw wind turbines was in Spain (in Grenada), and they just looked beautiful up there to me. And they were producing. There were five of them on the hill, and they were just producing energy. It looked, you know, to me they look beautiful. And to figure that you would never have the damage done from coal made me feel really good about it. Wind turbines --- I've also seen now in [the] West. And, you know, Iowa --- those areas have a lot of wind turbines. And it's amazing. The farmers love it, because they can put them there, and they still get they get a rental income (about a couple thousand dollars a year), and they can still grow their crops. And so, it looks like something that has kept a lot of farmers in business, actually because they could do, you know, that they have a lot of acreage, and they could put a big bar [bus bars for wind turbines]. You know, so another downside would be --- let's see. You mentioned the birds. Now they do paint one blade black, and it made a noticeable difference in terms of the number of birds who fly into it. And they also have avoided putting them on where they have the migratory birds go, you know. They don't usually put them there. They put them out, you know, someplace else. So again, I don't think. I know people love to make jokes about being a, you know. Yeah. Right. I thought that ...

Stitzel: Yeah. I thought that was an urban legend. I thought the birds probably aren't flying in. But you're saying it is a real concern, if they don’t take the steps.

Papachristou: They do. They do. And it's really damaging for planes too, if the birds fly near your engines.

Stitzel: Right.

Papachristou: So yes, it definitely is a problem. And they, you know, again, I haven't spent that much [time]. You know, I must say at one point I used to be an avid bird watcher. But I don't do it that much anymore. But, you know, they used to have the cranes coming down. The sandhill cranes come down through West Tennessee, I'm [actually] gonna say East Tennessee. And it would be a big deal, [because] people [would] go out and look at them. And yeah. Some of them probably would get [or] could get damaged if they put them in the wrong place. Yeah.

Stitzel: So, we're coming up on an hour. And so, I, kind of, wanted to get/let your final thought be something that just, kind of, ties all this together; because it just gives me a very positive feeling, right? Lots of good economic forces. And if policy can get out of the way with some of the subsidies that are in the in the way at this point, [and if] technology's moving the right way, [then] we probably have some hope for this. And maybe, sort of, in spite of some of government action, we're seeing innovation and growth in a lot of these renewables. That's really exciting. So, leave us with a thought just, sort of, how you see the future, because you've talked about that a bunch throughout this episode here. Tell us what the future you see for renewables, and how they might shape the economy, and maybe replace some of the extractive resources that we've been talking about.

Papachristou: So, you know, what I was thinking was, you know, a lot of positive things obviously about renewable energy with wind and solar. And I've been studying this now for over 10 years, and I'm very excited about where we are now in terms of, we can't go back. The prices/the market has made it so without [that] they used to always like to not let us know whether there was going to be a renewable tax credit for investing in solar panels on your house, whatever. And now that's not necessary. The prices are down so low that it's, you know, it's almost a no-brainer, because with/the how much you can produce. And even if you have to buy a battery for storage, you're still cheaper than what the electric company is going to be selling to you for. And so, I'm very hopeful because of that. And I'm also thinking that instead of subsidizing fossil fuels, we should take that money (that $500 billion dollars) and use it for retraining people in the coal industry, [in order] to get more renewable jobs. And it's easy, you know, [because] there are programs out there that you can train. Again, a lot of these people are intelligent people [who] maybe could train to do something else. I was surprised to hear that Kentucky has a program where they train people for about a year so they can become --- they may have been machinists before but now that their goal is to be --- machinists who fix robots. And these people making $71,000 in Kentucky [are] high school graduates. So, I think we can do something for the people who are going to be displaced by the coal industry. And, I think, we really should be looking to redeploy those people into something that's more beneficial. So that would be my last thing, in terms of being helpful, that this disruption --- you know, we talked about creative destruction and the fact that there are often waves of inventions that --- affect some places so much. Well, just like [how] the old/the coal fossil fuel industry shaped the industrial revolution, now renewable energy is in a position to shape our new future; [wherefore it will be so] that [it] will be a clean environment, and give us cheaper energy, so we don't have to worry about that. And we can deploy the other assets into something else that will be better for us. And again, we don't need to ruin Alaska in order to exploit their energy anymore, and to put roads through the Tongass National Forest (which is the lungs for North America). We don't need to do that anymore, because we're going to have --- in probably five years, enough --- plenty of new renewable energy at half the price they are now, which is the amazing thing. How could they be half of three cents? But, you know, that's what they're supposed to be if they're widely adopted. So, I [am] hoping people will go and check out YouTube. The one YouTube video that was so important was the --- they call it VPRO, and it's called Breakthrough Renewable Energy. It is fantastic. And it's so well done, showing how this is the energy of the future.

Stitzel: My guest today has been Patricia Papachristou. Pat, thanks for joining me on the EconBuff.

Papachristou: Thank you so much for inviting me. I've really had a good time talking to you. Bye, bye.

Stitzel: Thank you for listening to this episode of the EconBuff. You can find all previous episodes on YouTube at EconBuff Podcast. You can check out our website at econbuffpodcast.wixsite.com. You can contact us at econbuffpodcast@yahoo.com.