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Archive for November, 2009

I generally dislike the term “colonialism” to describe modern political and economic relationships, but I do observe a “colonial” relationship between the urban centers of Boston and suburbs and the rural community of Greenfield and surrounding forests, around the proposed Greenfield bio-mass plant.

The bio-mass plan proposal is to build a 40+megawatt electrical generating plant using timbering waste and “unuseable” forest bio-mass as fuel. Bio-mass is defined in Washington and in Boston as a renewable energy source and is therefore eligible for federal and state tax credits that make what would be an economically infeasible plant into a feasible one.

The tax credits are transferrable between entities, meaning that the plant can sell the tax credits on an “open” market, and realize cash from the credits immediately, even if the plant itself can’t take advantage of the credits on their own returns. If the plant fails and never earns the credits, after being sold (perhaps multiple times), it is a difficult trail to track whether the those credits can be recouped.

The plant itself is estimated to realize around 20% efficiency in conversion of the energy in the bio-mass into electricity, then as the local region is self-sufficient in electricity generation from extensive hydro power, the electricity will be exported in effect, primarily to serve Boston and suburbs (which seek electricity). There is then additional line loss, perhaps 50%, netting a realizable 10% of original biomass energy.

Most of the energy will be exhausted into the atmosphere in the form of heat. (There were considerations about operating a heating plant from the heat released, but the plant is too remote from residences or industry to be relevant.)

Estimates of the consumption of forest land required to feed the plant range from 1 1/2 sq miles of deforestation per year up to 6 was the highest that I heard. (I would assume that that was exagerated.)

The original assertion was that the biomass plant would be fueled by waste from other natural timbering operations, but domestic timber operations are in a near-permanent depression, largely resulting from ruthless international competition, most importantly Russian export, but also Southeast Asian.

So, if the fuel is not from waste timber, then it has to come either from original clear-cutting, or from other waste (which is often painted or otherwise treated with highly toxic materials which are extremely damaging to the public health to release airborne.)

To compound the inefficiency of the generation and delivery, is the likely inefficiency of use, say for electric heating into poorly insulated buildings, or inefficient lighting, or background household load. (As I referred in a previous post, the motivation for energy efficiency is much less in the more expensive Boston suburbs as the operating costs comprise a much lower percentage of the cost of living in a house than where I live.)

So, that creates a dysfunctional structure of negligence from Boston and suburban residents, creating the need to clear-cut Western Massachusetts forests.

From the state perspective, driven by a definition of present and prospective democracy of one-person one-vote, the urban populations’ needs supercede the rural. There is likely to be greater demand for electricity in the future, as transportation shifts in any material proportion to electric drive.

The problem is that the political dynamics of the plant indicate the really substantive divide between rural and urban centers, and might suggest some state secession (from Massachusetts, not the US) or becoming part of Vermont, with more common interests.

There are positives to an increasingly impoverished region, which is jobs (even if low-paying and dangerous – tree-cutting has an 18% workers’ comp rate), and property tax revenues to the town.

The opponents of the plant have their exposed NIMBY contradictions as well, as many do use wood heat with its particulate exhausts, and can’t really claim to be holier than thou. Also, the contracts between forest property owners selling their wood to the plant would be consented contracts between property owners. The right to a view is not legally binding. I don’t know what happens if deforestation reaches a status where other forest services (water purification, etc.) can’t function.

There are legitimate concerns about the effects on local aquifers as the plant will use an enormous amount of water, and certainly air quality affects will be significant. (In the Connecticut River Valley, bad air is funneled up the valley, concentrated.)

My assessment of the absurdity of the plant relates to the negligence to create incentives to conserve energy in space heating and transportation in Boston and suburbs (either in the form of deep tax credits for achieving targeted and audited results, or in much higher taxation of all energy in all forms).

I personally corresponded with the president of the company constructing the plant, requesting that he organize the investment of 1/35th of the capital investment in the plant, into direct investments in energy conservation. He responded that the capital was raised for the limited purpose of the plant, and even as he regarded conservation as meritorious and even profitable, he was not able to do so.

Polite. I don’t know if it is accurate.

In an environment in which all the even remotely economically justifiable energy conservation measures are undertaken, then I would say that a forest bio-mass plant could be a desirable next layer of renewable electricity generation, better than coal certainly.

But, that environment does not exist, and is not seriously contemplated. We will instead incentivize the deforestation of New England and the US, our last natural capital resource, our home.

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Yesterday I wrote about the some of the mix of incentives that deter the likelihood that sustainable/simple practices will be adopted in urban and/or more accurately suburban affluent areas.

The relationship between urban and rural communities is a critical concern, deserving of great attention.

Risking over-generalizing, cities are human-centric. The virtues of city life are the virtues of human creations, what people make. That is what urban economy is about, HUMAN value addition, work. Industry, arts, governance, finance.

All of human creation, and most importantly socialized into human-centric, urban norms. We adjust primarily to our human culture in cities, the culture of our workplaces, the culture of our residences, the culture of our friendships. Even a snow storm is a small event in cities. It passes. It doesn’t form identity.

In contrast, rural small towns and cities are more nature-centric. Much more of our lives are relative to the forests, the growth on farms. We are socialized into both human cultural orientation and the natural. A snow-storm is an event, around for a long time, affecting our lives commonly for a long time. Its not just a little colder. The value-addition that we are able to realize in an economy comes much much more proportionally from things that grow, from water that gets purified naturally. Our cultural virtuous references are natural, “I am the tall tree”, more than social “We are family.”

I’ve recently spent a great deal of time in my home town of Greenfield, MA, and in the largest big city near me, Boston, MA. (I get to spend most of my time in my home town, unlike many that live in one place and work in another.)

One critical aspect of the effort for sustainability, is the implication that urban sprawl will come to be a difficult way of life, and the individuals will prefer to settle in small towns and cities, more rural. The expectation is that migration will occur, that when work is scarce, people will migrate to where “God’s gifts” are available to derive and create value from.

In Greenfield, and other  towns and small cities that were formerly agricultural and/or manufacturing centers, with a few exceptions, most are in a state of decline. There is little value-addition occurring there, very limited investment, very limited career paths for young adults to come to the towns, and therefore families inevitably get split up as children move elsewhere to work.

It becomes a downward spiral. There are less funds available for education, less vibrant and uplifting people moving to the town. In Greenfield, the biggest problem for any prospect of development in town, is that nearly all of the potentially useful land is already taken up in sprawl housing, retail, and crumbling poorly designed mills. (The prospect of universal conversion to small business incubators occurs, but is overblown.)

There is also sadly the NIMBY factor. There is the appearance of possibility of restoration to the “good old days”, so the few important developments that aren’t Wal-Mart’s also get shot down. (There was a proposal to build an office park on formerly agricultural land near a local community college a few years ago, that was fought on ideological NIMBY grounds. It would have been an uniquely appropriate use of the land, providing a great number or value-adding jobs with minimal ecological footprint per job created.)

In small towns and cities people are not anonymous. When I walk down the main street or main stores, on most days I meet someone that I know personally. There are times when its people that I’ve conflicted with that I meet, but most times its a personal friend.

EVERY project, every policy decision, involves discussion with people that we’ve worked with before. It is therefore necessary for us to keep learning (and remembering design features) all the time, so that our staleness doesn’t block up all potential.

It is important that those with vision and imagination and capital, spend a good deal of their time working to make small towns and cities more viable economically, in realizing economic viability from the “gifts of nature”, and from some participation in the urban value chain (especially with the web). I actually oppose relying on urbanizing rural communities too much, in that there is the prospect that the rural communities will become just homogenous, commercialized, and overpriced. Not just sprawl, but the vision of global currency trader operating in Greenfield as easily as Boston, upsets me. I do analagous things, and has a place. I fear its ubiquity though.

Currently there is a colonial relationship between urban and rural, between Boston and Greenfield for example. The most relevant example of that in current proposal is the proposed bio-mass plant now in permitting phase.

Tomorrow.

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Many individuals have commented to me that when the cost of oil increases significantly, there will be difficult economic traumas, and accompanying changes in the way that people live, hopefully to a less energy squandering lifestyle with less CO2 emissions.

I would like to believe that, but I’ve observed that the relationship between operating costs (gasoline for example) and capital or ownership costs (car payments and insurance), make that less likely to occur by individuals’ decisions.

The two largest areas of energy consumption occur in the areas of space heating (including owned residential, rented residential, and commercial/industrial) and in transportation (including personal and commercial).

In housing, a relatively energy efficient home might spend $1.25/sq foot annually on heating and cooling, or $2250/year for an 1800 sq ft home (not small, not McMansion). A less energy efficient home might cost double that, $4500/year.

In an 1800 sq foot home that costs $200,000, the mortgage payments might be $1350/mo, insurance of $100/mo, real estate taxes of $250/mo, or a total of $1700/month ($20,400/year) of ownership costs, compared to $4,500/year of operating costs, 18% operating costs.

If fuel costs doubled, the percentage of operating costs would be 30.6%

Considering the decision to make energy related improvements, the value of an energy efficient home would increase as the operating costs make it a better value. The percentage improvement in home value is likely to be a material percentage of the value of the home.

In a more affluent market, that same home might cost $400,000, with mortgage payments and other ownership costs of $3400/mo ($40,800/year), with the same $4,500 of operating costs, representing 10% operating costs.

If the costs of fuel doubled, the percentage of operating costs would be 18%.

The message is that in upscale urban environments, where most people live and own property, the proportion of savings resulting from energy improvements is much less of a concern to homeowners’ decision-making process. Where energy driven home renovation makes sense for economic purposes, say to save $1000 or $2000 or $3000/year, but it is less important than other urban concerns.

Where there is some threat to the livelihood of someone that must keep up with the $40,800 of annual home ownership costs from an otherwise rational effort to realize a simpler national life, by choice, they will opt for policies that preserve their jobs in the rat race, more than policies that result in energy independence, and all the odd policy and lifestyle distortions that that entails.

That decision emphasis is especially prevalent where so many are in such high debt. If one owned their home outright, then the decision to renovate for energy improvements would be an easy rational one. The decision stands alone and makes sense. Where people are in great debt, the decision is then to increase their debt, increasing their anxiety and dependancy on high steady income in the rat race.

A similar logic applies to auto ownership.

If one owns a car that gets 30 mpg, and costs net $6,000 originally (cost – tradein), car payments are $150/mo, insurance $100/mo, taxes $40/mo. Total ownership costs are $300/mo. Operating costs at 1000 miles/mo are $85/mo, or 22% of total costs.

If the cost of fuel doubled, operating costs would be 36%.

If one owns a care that gets the same 30 mpg and costs $12,000 originally (cost – tradein), total ownership costs are $600/mo, with the same operating costs of $85, or 12.4% of total costs.

If the cost of fuel doubled, the percentage of operating costs would be 22%.

The proportion of operating costs do not affect those owners as much. They’ve already made their decision about what is important, the nice car.

Motivations of the affluent (tending to be urban and suburban rather than rural) are ironically less driven by fuel cost considerations, and more by fashion and/or regulation.

It was a sobering revelation to me, to understand that my pet logic (increased fuel costs motivating behavioral changes), didn’t apply as much as I had thought.

It is partially caused by our savings/debt problem that allows us to buy beyond our means.

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