The Cost of Natural Gas [was Re: The Cost of California Liberalism]

auto58194 at hushmail.com auto58194 at hushmail.com
Fri Dec 29 12:33:25 PST 2000


"James A. Donald" wrote:
>
> He describes the california system as "deregulated", but the fact that
it
> takes many years to get permission to build a power plant -- that it takes
> longer to get permits than to actually build one, is undoubtedly a
> contributing factor to the crisis.
>

Of course it is.  With plenty of excuses to hand out, a deregulated industry
will act more boldly.

If it's so hard to build power plants in California, what is the obsession
with building them in California?

Looking at the queue of plant requests within California they also seem 
to be obsessed with building them in highly populated areas.

I suppose one has to consider the plight of the capitalist here.  Given 
that the ROI on a plant closer to demand is higher (less additional infrastructure 
such as transmission lines and substations) than one far away, it becomes 
a no-brainer which to build from a profit standpoint.  Considering power 
plants were competing with dot-coms for investment capital, it's no surprise 
that ROI on a plant needed to be made as high as possible to have any chance 
of being funded.  

Thinking about it that way, it shouldn't be too surprising the result is 
high-ROI plants get built where people don't want them but eventually accept 
them after a year or two's delay.   The capital for the plant is just invested 
elsewhere during the delay, so the delay doesn't harm the capitalist.   
If anything, it helps as the delay just serves to let shortage warnings 
and emergency notices go out, lets prices go up, makes people worry about 
blackouts, and then the next plant can be built with an even higher ROI. 

So in a perverse sort of way, the system works just fine.  For the capitalist 
anyways.  



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