By Stephen Power And Ben Casselman

Three big companies quit an influential lobbying group that had focused on shaping climate-change legislation, in the latest sign that support for an ambitious bill is melting away.

Oil giants BP PLC and ConocoPhillips and heavy-equipment maker Caterpillar Inc. said Tuesday they won’t renew their membership in the three-year-old U.S. Climate Action Partnership, a broad business-environmental coalition that had been instrumental in building support in Washington for capping emissions of greenhouse gases.

The move comes as debate over climate change intensifies and concerns mount about the cost of capping greenhouse-gas emissions.

On a range of issues, from climate change to health care, skepticism is growing in Washington that Congress will pass any major legislation in a contentious election year in which Republicans are expected to gain seats. For companies, the shifting winds have reduced pressure to find common ground, leading them to pursue their own, sometimes conflicting interests.

Last week, the head of the Pharmaceutical Research and Manufacturers of America, Billy Tauzin, said he would step down as president of the industry’s main lobby in Washington, amid criticism from some in the industry over the alliance he made last year with the White House to support health-care legislation.

The administration had worked hard to persuade industry groups to climb aboard its major legislative initiatives—a tack many business interests saw as sensible following the Democrats’ big gains in the 2008 elections. But “unlikely bedfellows make for breakups,” said Kevin Book, managing director of Clearview Energy Partners, a consulting firm.

Spokesmen for ConocoPhillips and BP said the companies still support legislation to reduce greenhouse-gas emissions, but believe they can accomplish more working outside USCAP’s umbrella. Caterpillar said it plans to focus on commercializing green technologies.

ConocoPhillips’s senior vice president for government affairs, Red Cavaney, said the USCAP was focused on getting a climate-change bill passed, whereas Conoco is increasingly concerned with what the details of such a bill would be.

“USCAP was starting to do more and more on trying to get a bill out without trying to work as much on the substance of it,” Mr. Cavaney said.

A spokesman for USCAP said it intends to continue its work. More than 20 other large companies, including oil company Royal Dutch Shell PLC and industrial heavyweights General Electric Co. and Honeywell International Inc., remain in the coalition with environmental groups such as the Environmental Defense Fund and Natural Resources Defense Council. The USCAP said it expects to add new members in coming months.

“We think there’s momentum to get [a climate bill] done,” USCAP spokesman Tad Segal said. “President [Barack] Obama’s State of the Union address made it clear the administration is behind us.”

Read the rest of this article at Wall Street Journal.

By Jack Duckworth

The Washington Times reports that three utilities and two manufactures, Nike Inc. and Apple Inc., resigned from the U.S. Chamber of Commerce because of the chamber’s fight against the proposed “cap-and-trade” legislation (”Backers of climate bill quit chamber,” Page 1, Tuesday).

I worked for the Federal Energy Regulatory Commission and its predecessor, the Federal Power Commission, for 32 years, and that experience taught me that no corporation or utility acts in the interest of the American environmental or social conscience. You can be assured that Nike, Apple and the three utilities want a cap-and-trade bill to pass the House and Senate because it will strengthen their position in the marketplace and increase their profits.

Nike has installed energy-monitoring devices in its manufacturing plants in China and Vietnam in an effort to cut energy consumption. That’s a noble effort, but even if Nike fails to cut its energy consumption, it will not be penalized by a U.S. cap-and-trade law because its energy consumption and its manufacturing take place outside U.S. borders.

Apple is in the same boat with its overseas production. It has undertaken a program to reduce the energy consumption of its finished products, but it will not suffer any impact to its profits due to passage of a cap-and-trade bill.

The three utilities that want to see a cap-and-trade bill passed are PG&E of California, Exelon Corp. of Chicago and PNM Resources Inc. of New Mexico. PG&E has been heavily invested in hydroelectric generation since it came into being and has significant nuclear power generating resources; both of these will be profit boons under a cap-and-trade bill. Eighty-three percent of Exelon’s electric generation resources are nuclear, which will make it a profit king under a cap-and-trade bill. PNM Resources is a 10-percent owner in the Palo Alto nuclear-generating station near Phoenix. All of these corporations have everything to gain and nothing to lose if the cap-and-trade bill becomes law.

Read the rest of this letter at the Washington Times.

Why “Smart Grid” Technology is Dumb

By William Yeatman and Jeremy Lott

America is a beacon of capitalism, so it can be jarring to discover one of its largest industries is a redoubt of socialism. State governments have been running the electricity business, currently a $330-billion-a-year industry, since Theodore Roosevelt pounded his White House bully pulpit.

Central planning of the electricity industry started during the Progressive Era, as is the case with many misguided policies. Early in the 20th century, intervention-minded progressives, such as Wisconsin’s Robert “Fighting Bob” La Follette, concluded that electric companies would consolidate into “natural” monopolies that preyed on consumers. This was a curious conclusion to reach at a time when electric companies were competing vigorously in many cities.

Their remedy for this theoretical drift toward natural monopoly was, incredibly, to establish real government-mandated monopolies. States created commissions with the regulatory power to outlaw competition among utilities and set the price of electricity for consumers. By the end of the Great Depression, almost all Americans bought their electricity from government-backed monopolies, and it remains so to this day.

The progressives reasoned that electricity providers couldn’t abuse consumers if they labored under the state’s thumb, but it’s far from that simple. Without competition, there is no spur for innovation, which is why electricity transmission and distribution–the system of wires, towers and poles that transmits electricity from the power plant to your home–haven’t changed much since the regulators stepped in.

That’s unfortunate, because while the power system remains frozen in time, American society as a whole has changed dramatically. The U.S. has become a wired nation, a people wholly dependent on reliable electricity to power their computers, phones and iPods. And America’s anachronistic electricity supply chain is failing to keep pace with demand. Massive blackouts in California (2005), Florida (2008) and the entire Northeast (2003) serve as stark reminders of the fragility of the U.S. grid.

Congress wants to overhaul the system by spending a king’s ransom on technologies that would give utilities the ability to moderate consumer demand–by, say, remotely turning down millions of thermostats during periods of peak use. In theory, this might avoid the supply crunches that can stress the system to the breaking point, leading to blackouts. Proponents call this a “smart grid” approach, but it’s really a stupid policy, especially when the U.S. could modernize the system without spending a penny from the government treasury.

Read the rest of this story at Forbes.

Wind Turbine

By Peter Glover and Michael J. Economides 

This is not what President-elect Barack Obama’s energy and climate strategists would want to hear. It would be anathema to Al Gore and other assorted luminaries touting renewable energy sources which in one giant swoop will save the world from the “tyranny” of fossil fuels and mitigate global warming. And as if these were not big enough issues, oilman T. Boone Pickens’ grandiose plan for wind farms from Texas to Canada is supposed to bring about a replacement for the natural gas now used for power generation. That move will then lead to energy independence from foreign oil.

Too good to be true? Yes, and in fact it is a lot worse.

Wind has been the cornerstone of almost all environmentalist and social engineering proclamations for more than three decades and has accelerated to a crescendo the last few years in both the United States and the European Union.

But Europe, getting a head start, has had to cope with the reality borne by experience and it is a pretty ugly picture.

Independent reports have consistently revealed an industry plagued by high construction and maintenance costs, highly volatile reliability and a voracious appetite for taxpayer subsidies. Such is the economic strain on taxpayer funds being poured into wind power by Europe’s early pioneers — Denmark, Germany and Spain – that all have recently been forced to scale back their investments.

As a result this summer, the U.K., under pressure to meet an ambitious E.U. climate target of 20 percent carbon dioxide cuts by 2020, assumed the mantle of world leader in wind power production. It did so as a direct consequence of the U.K. Government’s Renewables Obligations Certificate, a financial incentive scheme for power companies to build wind farms. Thus the U.K.’s wind operation provides the ideal case study — and one that provides the most complete conclusions.

The U.K. has all the natural advantages. It is the windiest country in Europe. It has one of the continent’s longest coastlines for the more productive (and less obtrusive) offshore farms. It has a long-established national power grid. In short, if wind power is less than successful in the U.K., its success is not guaranteed anywhere.

But wind infrastructure has come at a steep price. In fiscal year 2007-08 U.K. electricity customers were forced to pay a total of over $1 billion to the owners of wind turbines. That figure is due to rise to over $6 billion a year by 2020 given the government’s unprecedented plan to build a nationwide infrastructure with some 25 gigawatts of wind capacity, in a bid to shift away from fossil fuel use.

Ofgem, which regulates the U.K.’s electricity and gas markets, has already expressed its concern at the burgeoning tab being picked up by the British taxpayer which, they claim, is “grossly distorting the market” while hiding the real cost of wind power. In the past year alone, prices for electricity and natural gas in the U.K. have risen twice as fast as the European Union average according to figures released in November by the Organization for Economic Cooperation and Development. While 15 percent energy price rises were experienced across the E.U., in the U.K. gas and electricity prices rose by a staggering 29.7 percent. Ofgem believes wind subsidy has been a prime factor and questions the logic when, for all the public investment, wind produces a mere 1.3 percent of the U.K.’s energy needs.

In May 2008, a report from Cambridge Energy Research Associates warned that an over-reliance on offshore wind farms to meet European renewable energy targets would further create supply problems and drive up investor costs. No taxpayer respite there. But worse news was to come.

Read the rest of this story at Energy Tribune.