Captain Obvious

Things have been unfolding quicker and quicker these last few months.  This blog started out indicating the Wall Street Journal tone had shifted pretty starkly toward outright criticism and abuse for climate alarmists.  Just this week, they released an article summarizing the climate alarmists are essentially dead in the water.  What an admission.  Read it for yourself: Affordability Wins!

It was only weeks ago that the emperor was declared butt naked! But notice however that the Wall Street Journal hid under the cover of an editorial board with no names to finally declare it: Wind and Solar Realities

“The claim that tax credits reduce electric rates is contradicted by experience. Wind and solar must be backed by peaking gas plants or batteries, which both cost more than three times as much baseload power. Renewables also cause price spikes when there are power shortages, and they require more transmission investments to balance fluctuations in loads and frequencies.”

This should come as no surprise as proven by other more recent articles in the Wall Street Journal: Europe Gets Religion on Green and Leftist Dreams Hit Reality
All of this is why Texas’s residential power prices have risen some 40% over the last seven years. The renewable lobby says the financial benefits of the tax credits are passed onto electric customers, which may be true when state-regulated utilities build projects. But the credits usually pad the profits of independent generators.

The best way to make the grid reliable again is to let supply and demand work in energy markets without the distortions of mandates and subsidies. The GOP budget bill takes a step in that direction that should be welcomed.

So many of my Captain Obvious blogs over the year have repeated this theme. It is the bedrock of good energy policy. Mandates and subsidies distort markets and, unfortunately, provide ample opportunities for opportunists to rob under the banner of innovation.

Don’t get me wrong. We do need a full portfolio of ideas, if for no other reason so that we can point to where they work and don’t. We once again need to include nuclear and hydro in new construction. We know we need more of both. But the naïve idea that wind and solar would save the day and bring about future utopia was far-fetched to say the least. However, only a few besides me would declare the emperor nude.

For a while, I just thought it was a form of being polite and inclusive … you know … like tolerating your less than brilliant relatives when they show up at your door to stay for a few days carrying their overnight clothes in Piggly Wiggly bags.

Then, I thought it could just be the loving attitudes toward those who can’t take care of themselves we are commanded to do in our faith traditions.

But now I must admit, after watching US politics over the past few years, there is something terribly wrong with humanity that it has become so polarized it can’t find common ground solutions to anything. Common sense is simply not common.  The complexities in life seem beyond the intellectual reach of just about everyone today. The mirage of simple superficially appealing notions is still so alluring it beckons the masses to follow truly stupid ideas.  

Therefore, it was refreshing to see this latest article pointing out the gaping holes and incorrect math of other recent alarmist tirades: Climate Study Retraction

Wake up people! Pay attention! Or, as one of my favorite lines in the movie Aliens by the Marine Private Hudson when encountering them: “Maybe you haven’t been keeping up with current events, but we just got our asses kicked, pal!”  It is time for sobriety and seriousness.

My master’s from RPI in management was in new product development, and I have spent my entire engineering career in wildly different areas: attack submarines, health care, rotor dynamics, heat recovery, and energy efficiency.  Chasing higher performance has been a recurring objective, but I quickly learned the laws of diminishing economic returns in real life.

Admiral Rickover singlehandedly drove the nuclear-powered dream for navy vessels. Economics was secondary or unimportant. We “pushed the envelope” in everything.  After finishing my masters in new product development, I worked in the health care industry optimizing the cost and quality of patient outcomes in the largest most complex hospitals in the world … pushing for greater productivity while under huge constraints due to a lack of nurses.

I then worked for MTI in Latham, New York where we focused on low temperature heat recovery using advanced power systems and heat pump technology.  I worked under some of the brightest minds in the world, assessing both technical and economic potential.  It was a wild and crazy place because we literally could design and build almost anything you could imagine … and did.

That firm was the first to design high speed dental drills running up to 300,000 rpm using air bearings.  We were the only firm in the world that could balance uranium enrichment centrifuges using lasers as it was run up to final operating speeds.  The people there were the brightest minds in the world on high-speed machines.

Our clients were mostly the national labs and the big defense departments. So, production economics were unimportant to them.  They were if you wanted something to sell to the public (we designed and built the gas turbine-driven engines for Chrysler).  Most often we just build demonstration projects to prove an idea was feasible.  For example, we built fuel cell powered cars long before the models you see now entered the market.

When you live in the world of defense, economics doesn’t matter.  You literally only care about developing a better mousetrap.  But, once you must face the real-world markets, it is quite another thing, and the market is unforgiving. Just because you build a better mousetrap, they do not necessarily beat a path to your door.

So, I was curious to read the latest approach to an area we considered about 40 years ago: Power generation from geothermal heat sources.  On one level, it is an obviously good idea since it would seem to be an endless source of energy.  However, once you take a closer look at the geothermal hot springs around the world, you find these sources are extremely corrosive and the sites are intrinsically dangerous and unstable.

MTI was so used to crazy ideas that our designers would often use the phrase: “we will have to build that out of superillium or unobtanium.”  These obviously fictitious metals were their polite way of expressing doubt that anything could survive these working environments.  Of course, when you do work in defense you also encounter the brutal fact that the service life of some things, like the engines used in fighter jets, only have a service life of a few hundred hours.  Think about that.

So, here we go again with geothermal energy … the seemingly endless free heat available from within the core of the earth. Here is an article that offers one perspective:  Volcanos Powering Homes

While this idea has proven to work in some narrow cases (Iceland and New Zealand) it has never been workable where high temperatures or extremely corrosive brines are encountered.  Plus, most of the recent attempts have failed to operate reliably over time even with government subsidies.

All too many of these dreams are more about sucking money out of a government research punchbowl faster than others while it lasts.  We have seen dozens of these projects emerge over the past few years doing absurd things like attempting to remove carbon dioxide from our atmosphere.  Removing it by capturing it at the major sources makes much more sense.  Eliminating the emission in the first place can make the most sense.

Contrast that with businesses that extend the boundary of economics … extracting lower grade resources due to economics that now make sense.  That was a necessity when we ran out of iron ore and had to figure out how to use taconite.  Here is the case for the production of copper, which is so essential in today’s markets.  The Next Generation of Copper Mining

However, copper isn’t sexy.  Our climate alarmists like chasing the dream of free energy.  It is not free … it is extremely costly to chase … and we don’t have superillium or unobtanium.

It is probably no surprise that some of today’s corporations offshore their dirty operations and then claim they are responsible citizens by publishing their standards of operation in this country – without ever validating claims of their offshore suppliers. Here is yet another example: The Truth about Battery Recycling

Please read the article in its entirety to see how the auto industry attempted to create a “green” battery brand and failed. I have been warning the EV industry that they too have a problem with their battery production like the blood diamond issue of years ago. Rare-earth element mining overseas often involves abuse of children and unsafe working conditions. We here in the United States largely turn a blind eye to these tragedies.

Similar problems exist within the United States in the proliferation of chemicals and “ultra-processing” of our food supply. After all, any food that doesn’t spoil in your fridge after a few months (or years) is probably food we shouldn’t be eating. Yes, the noose around the food industry is tightening, but not without a fight. The fact is that our foods are less healthy than most Europeans and the consequences are extremely serious to our health. 

Our food industry has been poisoning Americans for decades in their frenetic attempts to gain “belly share” as they define it. It used to be about marketing. Now it has become about deliberately producing food that is designed to be addictive. Remember the ads for Lays potato chips … bet you can’t eat just one? That was designed into chips then and that is the deliberate design for many other salty snacks.

The Netflix TV Series “Rotten” does an excellent job of uncovering the truth behind much of what we eat these days. It covers what is happening behind the scenes with avocados, garlic, chicken, bottled water, wine, and more. It is tragic and preventable. But it requires international law and enforcement … something the world seems reluctant and/or unable to do.

Electric utilities used to use the regulatory process of least-cost planning to account for factors that might otherwise not be considered in the supply of electricity. That was how they justified energy efficiency and conservation as rightful members of the energy supply portfolio. Otherwise, there was no incentive for a corporation to encourage consumers to use less of its product.

But along came the free market zealots with their claims of lower costs … and the result was predictable. Energy efficiency was no longer justifiable, as it kept costs higher than those of competitors who did not include it in their portfolio.

We attempted to warn the industry about this when we developed the simulation called Deregulation with the tag line “the game you must learn to play when you can no longer play monopoly.” Value-added propositions, like the green battery idea in the referenced article, are hard to make work in open, competitive markets. It requires value/price discipline, which our simulation showed was almost unachievable with three or more competitors.

It seems to me that our planet’s future rests on redefining the corporate responsibility equation so that responsible battery recycling is embedded into the business model. We must get off this treadmill of extractive business models. We owe it to ourselves and the generations to follow us. But are we willing or even able to go back to regulation to control markets?

Not sure how to fix it, but it’s clear we are not on the right path.

A recent article in the Washington Post on the premise that our pets are bored, and it’s ruining their lives and ours was just too tempting to ignore. The premise that we should worry about enriching the world for your cats, dogs, birds and other critters in our homes seems so tone deaf in a world as polarized as ours, and with a gap as wide as it is with our children who are being brainwashed right before our eyes. Are we more concerned about our pets than the people in our lives?

Here are some snippets from that article.  Think about these questions in the broader context of your family unit, friends, and community members:

Have you noticed the dog is acting strange lately? Maybe licking your legs like they’re ice cream cones, or worse, attempting an escape with every walk? Is the cat destroying things more vigorously and enthusiastically than usual? Is the bird screaming? Your pets, pampered and petted though they may be, are bored, and they are letting you know.

“Boredom, stemming from lack of mental stimulation or opportunities to control certain aspects of their environment, leads to frustration or stress in pets,” says Ragen McGowan, a research scientist in pet behavior and welfare with Purina, “which can lead to health issues.”

Those physical health issues can include weight gain, self-harm and a shortened lifespan. In addition, boredom can weaken the bond between a pet and his humans, or change the relationship between other pets in the household. If these things weren’t grim enough, there are also the compulsive behaviors and destructive tendencies to consider.

Well duh … these are the same problems we see in all relationships today, when we take each other for granted. The article goes on to suggest ways of providing some mental stimulation for your pet, and how to spend quality time with the pet as well.

While we are thinking about our pets, let’s examine our lives with those who should matter more.  Do we eat together, at least occasionally? Do we eat the same meal when we do? Can we talk about truly important life issues without raising our voices or biting our lips. Do we play together … cards or a board game or are we simply sharing the same space.

Susan and I never had pets because we traveled so much … we didn’t think it was fair to the pet. We were thrust into a situation where we had to rescue a cockateel that had found its way to our country club … perhaps you remember that story … and it was such a social critter that it wove its way into our hearts even though we only had it one week before I located the rightful owner.

I grew up with a dog as did my wife. I miss having one, but our boating life is just incompatible with that kind of pet. Dogs can teach us a lot about life … they are God spelled backwards you know.

What they all teach us is that relationships are easily damaged when we don’t nurture them. We need more reminders of this in the news … but pets was a nice start.  Given this week is Thanksgiving … let’s see if we can celebrate with loved ones without getting into heated arguments.  At least we are all eating the same food at the same meal for a change!  🙂 Enjoy!

The recent proposal to extend home mortgages from 30 to 50 years has the superficially appealing notion of reducing the cost of home ownership and, specifically, making it easier for first-time home buyers to purchase a home.

Nothing could be further from the truth.  While the average person might conclude that their mortgage payments would be about 60% of those at a 30-year term because they had so much time to pay, the fact is that there is almost no monthly savings benefit to buyers of terms longer than 25 to 30 years.  The interest rate dominates the equation, and longer terms always mean higher rates.  That is why the lure of adjustable-rate mortgages traps so many.

You can look at this yourself using XCEL and the “pmt” function, which has explicit variables of interest rate, term, and principal, and you will see the following. Here are the numbers for a $300,000 mortgage at 30- and 50-year terms, assuming a 6% interest rate. Remember that first-time home buyers often must have others co-sign because lenders are uncertain they can repay the loan. Leave that aside right now.

The 50-year mortgage would be $1,579 per month, which is only about 14% lower than the 30-year mortgage at $1,799. Small differences like this don’t change the lender’s perspective on the buyer. If you can’t afford the $1,799 you probably can’t afford the $1,579.

Or think about it from the lender’s perspective.  The monthly savings would only allow the lender to lend about $8,000 more for the value of the house!  And, the lender has more risk with the 50-year term, so the likelihood is they would raise the interest rate. If they raised it by 1% it would wipe out any benefits to the borrower. 

What really makes the 50-year term absurd is the total payments perspective. A 30-year mortgage at the rates would be just a bit less than $650,000. The 50-year mortgage would total over $1,00,750! That is more than $400,000 than the 30-year mortgage!! Smart buyers learn to pay off their mortgage along the way by doubling the payment specifically to reduce the cumulative effect of the interest rate.

The fundamental reason home ownership has become “unaffordable” is that the amount lenders will lend on a home is generally only 2-3 times the annual salary, and they have always tended to discount the female in a couple’s combined salaries because there is the likelihood they will have children and then choose not to work.

Risks are real in life and lenders generally understand that. The reason we had the bank collapse about a decade ago was there were absurd financial instruments in place that gave lenders the feeling they could “lay off these risks” and the result was that people were getting mortgages way beyond the 2-3 times annual salary guideline. We all know what happened when these risky derivatives imploded. Remember the phrase about banks being “too big to fail?”

The base problem with today’s housing market is a supply problem. We need to build starter houses specifically for this market, and I believe many builders now recognize this, specifically with very small house designs … which are really cute.

While I can appreciate leadership looking for creative ways to address this problem, my conclusion is that it will not pass financial scrutiny to be realistic. The idea that a 50-year mortgage term solves the problem is a mirage.

Sorry.  Superficially appealing notions are always like this.