Dubai World Misses a Debt Payment

Perhaps you thought all of the asset bubbles had burst last year. Not so.
Dubai World, an investment arm of the government of Dubai, which has been on a spending and building spree for years, missed a big payment to its creditors last week. The Economist reports that Dubai has already turned to its more conservative neighbor, Abu Dhabi, for funds:

It raised $10 billion from Abu Dhabi, its wealthier neighbour, in February. And hours before it requested a standstill, it said it had raised another $5 billion from two Abu Dhabi banks, although only a portion of that was available immediately.
These bail-out funds flow to the Dubai Financial Support Fund, a committee which is overseeing the restructuring of Dubai’s indebted companies. It is described by one banker as a “command-and-control cockpit”, imposing some financial discipline on Dubai’s government-backed champions.

Dubai and Abu Dhabi are members states of the United Arab Emirates, which rely on one central bank. The bank is moving cautiously, and rather cryptically, to restore confidence in Dubai:

The United Arab Emirates’ central bank issued a statement on Sunday saying that it would stand behind foreign and domestic banks operating in the emirates. It did not mention Dubai World, the investment arm of the Dubai government, which is $59 billion in debt.

The statement does not specify how Abu Dhabi and the other emirates plan to shore up, and clean up, Dubai World.

Giving Thanks

We have much to be thankful for.

Let us show our gratitude by taking care of the earth.

Photo: Apollo 17, NASA

1.1 Million Jobs

The New York Times reports that economists believe that the stimulus package might actually be working:

But with roughly a quarter of the stimulus money out the door after nine months, the accumulation of hard data and real-life experience has allowed more dispassionate analysts to reach a consensus that the stimulus package, messy as it is, is working.

The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. This chart summarizes three such forecasts:
As Brad DeLong points out, these figures are from economists who are paid to get it right.
Mark Zandi of Moody's Economy.com sums up the impact:

"In my view, without the stimulus, G.D.P. would still be negative and unemployment would be firmly over 11 percent. And there are a little over 1.1 million more jobs out there as of October than would have been out there without the stimulus."

Alert readers will remember that Zandi was an advisor to John McCain during last year's presidential campaign.

3.0 cents/kWh

Saving energy sounds like a virtuous objective, but could it be genuinely cost effective?
I've been studying a recent report from the American Council for an Energy-Efficient Economy (ACEEE) that concludes that energy efficiency is far cheaper than buying power:

On the costs of "saving" kilowatt-hours (kWh) through utility ratepayer-funded energy efficiency programs, the reported utility costs of saved energy (CSE) ranged from $0.023 to $0.044 per kWh (with a median value of 3.0 cents/kWh).

The U.S. Energy Information Administration reports that the average retail price of electricity in Delaware in 2007 was 11.35 cents/kWh. For Delaware, a kilowatt hour saved may be worth as much as 3.78 kilowatt hours earned, illustrating the ACEEE report's conclusion that "energy efficiency is by far the least costly energy resource option available for utility resource portfolios." This means it would be far cheaper to meet Delaware's current and future energy needs through efficiency programs than it would through building new capacity or buying power from the grid.

More on John Carney and DelaWind

Writing in the News Journal, Aaron Nathans has an update on DelaWind's efforts to build wind power towers for Bluewater Wind. DelaWind, which is now 95 percent owned by Amer Industrial Technologies, expects to create 567 jobs at its Edgemoor plant and another 116 jobs at Evraz Claymont Steel if it gets the business.
One might think that an effort to create hundreds of heavy manufacturing jobs would be greeted enthusiastically, but a few grumpy souls like state senator Joe Booth and Dave Burris are complaining because of John Carney's involvement in the project. Booth is remarkably sanguine about the 600+ jobs the venture would create. Carney shows more of a sense of urgency:

"Somebody's got to make them. Are they going to make them here in Delaware? Are they going to make them in Maryland, in New Jersey? Where?" Carney said in a recent interview.

Burris calls the firm "John Carney’s Delawind." But as I wrote three weeks ago, and Nathans confirmed today, Carney, who does not have an ownership stake in DelaWind, will no longer work for the firm as of January.
Three weeks ago, I wrote, "I don't know anyone who wouldn't like to see Delaware steel workers play a significant role in building this historic project." It seems I was wrong.

"A decade late and billions short"

Over at the Guardian, I take note of a remarkable mea culpa:

It was a startling admission from one of the architects of the modern financial system. John Reed, who with Sandy Weill created Citigroup, said the merger was a mistake. What's more, Reed went on to say that the repeal of the Glass-Steagall Act, which was needed to make the merger legal, was also a mistake.

It's time to question the idea that bigger is better when it comes to banking:

Instead of wondering which institutions might be too big to fail, it's time to consider whether the financial behemoths are too big to succeed. Sandy Weill spent his career trying to build the world's biggest bank, only to see it destroy billions in shareholder wealth and require federal bailout funds to keep it alive. John Reed's admission that the grandiose dreams of the bankers have turned out to be nightmares should bring pause to those who still argue that bigger is better.

Unfortunately, as I write, "Reed's mea culpa came a decade late and left the world's financial system a few hundred billion dollars short."
Update: Common Dreams picked up the piece.

Summarizing the Bluewater/NRG Story

Mark Svenvold has written a useful overview of the NRG purchase of Bluewater Wind in his Daily Finance column, including the history of the procurement process in which the two companies competed with Conectiv for the chance to build a new power plant in Delaware. Svenvold is well versed in the history of wind power in Delaware, having written a long piece about Bluewater in the New York Times Magazine last year.
Svenvold touches all the bases, including Aaron Nathan's reporting in the News Journal, the cancer cluster surrounding the Indian River power plant, Allan Loudell's interview with NRG's Drew Murphy, Jeremy Firestone's filings with the Public Service Commission, Willett Kempton's survey of offshore wind resources, and this blog on NRG's pending investment in emissions controls and the economic value of the PPA.

"NRG [is] buying a power purchase agreement that provides 25 years of revenue, which is hard to do in any business," as Tom Noyes explains. "And Delmarva Power is buying 25 years of power at a set price, which is almost impossible to do in the energy business."

Energy and the Environment in China

Foreign Policy has published a useful overview of China's environmental problems and progress:

Bottom line: China might be taking great green steps forward, but it is starting from many steps back. In a reverse of Western environmental history, China is focusing on energy before pollution, adopting some of the globe's most ambitious targets: to derive at least 15 percent of all energy from renewable sources by 2020 and to reduce energy-intensity per unit of GDP by 20 percent over a five-year period. Implementing these energy targets will serve Beijing's twin purposes of increasing energy security and stimulating local economic activity. But these measures still won't leave China greener than countries in the West -- particularly since it still has a tremendous and expensive pollution problem to face at some point in the future.

But isn't China leaping ahead of the U.S. in solar and wind technology?

What's more, just because China is manufacturing green technologies doesn't mean it's using them. Indeed, China exports 90 percent of the solar panels it manufactures.

The results of this headlong rush into renewable energy shows the limitations of China's top-down planning:

Beneath the striking headline numbers, officials are working out serious kinks. For instance, the lure of striking gold by manufacturing green has turned the heads of mayors across China. Now, the State Council is trying to rein in an overheating solar sector by ordering plant closures. And though China is building wind farms, 20 percent of installed capacity is not connected to the grid yet -- due to technological gaffes and politicking as various established energy suppliers attempt to block new rivals.

The problem of population growth and urbanization will make it difficult for China to reduce energy demand in absolute terms:

With 350 million people -- more than the total population of the United States -- expected to move from China's countryside to its fast-growing cities over the next 20 years, energy demand and carbon emissions will almost inevitably soar, possibly even doubling. But while China cannot decrease its emissions, it can bend the growth curve down more than any other country.

Delaware Environmental Summit Convenes November 14

Registration remains open for the 2nd Delaware Environmental Summit:

Saturday, November 14, 2008
8:30 a.m. to 12:30 p.m.
Wilmington University, Dover

Objectives:

1. Support the ongoing advocacy work of Delaware’s environmental organizations.
2. Enhance the coordination among Delaware’s environmental organizations.
3. Where needed, foster new collaborative efforts among environmental advocates.
4. Engage new partners in environmental advocacy.

As we come towards the end of an eventful year, we are gathering to make plans for 2010. Please join us to discuss recent progress and make plans for environmental advocacy efforts for the coming year. Participants will be given a chance to discuss their priorities for the coming year and start to make detailed plans for collaborative efforts to achieve our objectives in the following areas:

Air Quality
Energy and Climate Change
Food and Agriculture
Green Economy
Land Use
Law and Regulation
Nature and Wildlife
Water Quality
Zero Waste

We are asking organizations to contribute $25 (covering all members of that organization) and unaffiliated individuals $5 to defray the cost of the Summit. Please bring your check or cash with you to the registration table at the Summit.
Directions to Wilmington University in Dover: Route 13 North (at Scarborough Road), at the intersection of Exit 104 from Delaware Route 1.
Please register by e-mail to politics@delaware.sierraclub.org.

Affiliation or organization:
Name:
E-mail:
Address:
City: State: Zip:
Phone:

Please join us if you want to help shape environmental policy and advocacy in the coming year.

NRG and Bluewater: Is There a Catch?

Could this be a trick or a ploy? Could NRG have bought Bluewater Wind to somehow control the growth of windpower? Could NRG have bought the windpower football just to pull it away from Charlie Brown?
I don't think so. NRG VP Drew Murphy yesterday repeatedly spoke of claiming the first mover advantage in talking to local and national media. He noted the proximity of offshore wind to a large load centers—in contrast to onshore wind in Texas and the Midwest which will require billions in transmission lines to get to customers.
Writing in the News Journal, Aaron Nathans spoke with a number of environmentalists whose reactions to the acquisition ranged from suspicious to enthusiastic. One suspicion expressed in comments to this blog and privately, is that NRG would use the acquisition to keep a lid on wind power. For instance, would NRG prefer to sell power from coal rather than sell power from the wind farm?
I discussed this yesterday with Nathans and professor Jeremy Firestone, who said, "You're always going to put the wind onto the system. You'd never turn it off."
I agree. Once the wind farm is built, NRG would want to sell every drop of power it produces. The wind farm's peak capacity will be higher than needed to meet the needs of the power purchase agreements (PPAs) with Delmarva Power, the Delaware Municipal Energy Corporation (DEMEC) and any other customers that sign on in order to ensure a steady flow of power. Once the wind farm's PPA customers needs are met, any additional power generated can be sold to the grid at any price Bluewater can get.
Unlike a coal plant, which would have to burn more fuel to generate more power, there is no marginal cost to selling extra wind power. If the turbines are already spinning, any additional power sold to the grid goes straight to the bottom line—even if it is sold at two cents a kilowatt hour.

NRG Is Buying Bluewater Wind

Bluewater Wind is making "an important announcement" today in two separate public meetings, upstate and downstate. I'm guessing that Bluewater will announce new financing from a new parent company. Last week, the News Journal published a story that NRG was in talks to buy Bluewater and finance the construction of the country's first offshore wind power project.
Update: It's official; NRG is buying Bluewater: Peter Mandelstam will remain president of Bluewater Wind and lead wind power development for NRG.
Stay tuned.

2nd Delaware Environmental Summit

I reported on the first Delaware Environmental Summit back in January. Most of Delaware's environmental advocacy organizations came together to discuss priorities and strategy for the year. Now we are organizing a follow up:

The 2nd Delaware Environmental Summit
Saturday, November 14, 2008
8:30 a.m. to 12:30 p.m.
Wilmington University, Dover

Objectives
1. Support the ongoing advocacy work of Delaware’s environmental organizations.
2. Enhance the coordination among Delaware’s environmental organizations.
3. Where needed, foster new collaborative efforts among environmental advocates.
4. Engage new partners in environmental advocacy.

As we come towards the end of an eventful year, we are gathering to make plans for 2010. Please join us to discuss recent progress and make plans for environmental advocacy efforts for the coming year. Participants will be given a chance to discuss their priorities for the coming year and start to make detailed plans for collaborative efforts to achieve our objectives in the following areas:

Air Quality
Energy and Climate Change
Food and Agriculture
Green Economy
Land Use
Law and Regulation
Nature and Wildlife
Water Quality
Zero Waste

We are asking organizations to contribute $25 (covering all members of that organization) and unaffiliated individuals $5 to defray the cost of the Summit. Please bring your check or cash with you to the registration table at the Summit.

Directions to Wilmington University in Dover: The Dover campus is located on Route 13 North (at Scarborough Road), at the intersection of Exit 104 from Delaware Route 1.

Please register by 5:00 p.m. November 9th.

Affiliation or organization:
Name:
E-mail:
Address:
City: State: Zip:
Phone:

Organizations are asked to offer a brief (two pages only) summary of their policy objectives for the year. Please send it to politics@delaware.sierraclub.org by November 9th, 2009.

Please join us if you want to help shape environmental policy in the coming year.

"Well, someday is here."

Aaron Nathans reports in the News Journal that Delmarva Power could have killed plans to build the first offshore wind power project in the U.S. when Bluewater Wind failed to deliver a letter of credit last July. Bluewater is looking for a new investor after its highly leveraged parent company, Babcock & Brown began to collapse under the weight of its debt. Delmarva Power declined to cancel the power purchase agreement (PPA) after Bluewater failed to deliver the letter of credit.
Earlier this week, Nathans broke the story that NRG, which competed to build a new power plant in Delaware, is planning to buy Bluewater. Nathans asks why have two opponents gotten in bed with the upstart wind power company?

It wasn't that long ago that Bluewater Wind's main opponents were Delmarva Power and NRG Energy.
But if Bluewater's offshore wind farm gets built, it may have both to thank for keeping the project afloat.

Why? NRG and Delmarva Power fought Bluewater tooth and nail. Nathans asked me:

"You know how people say soccer is the sport of the future and always will be? I think that's how people have felt about wind power," said Noyes, whose blog is called TommyWonk. Company officials thought of offshore wind as "experimental, nice to do someday. Well, someday is here."

The fundamental reason that NRG would want to buy Bluewater and Delmarva isn't fighting the deal is that wind power is makes economic sense for the investor and the customer. Nathans points out that "Bluewater's main asset is the Delmarva contract." NRG would be buying a PPA that provides 25 years of revenue, which is hard to do in any business. And Delmarva Power is buying 25 years of power at a set price, which is almost impossible to do in the energy business.
Update: I'll be discussing Bluewater with Allan Loudell on WDEL, 1150 AM, today at 5:35

Barack Obama, a Year Later

A year after his election, how popular is Barack Obama?
I went over to PollingReport.com to take a look at the numbers. Polls asking about job performance doesn't allow us to go back a year, since he was in office yet. But some polls have continued to ask the favorable/unfavorable question through the campaign and into his first year in office. Of these, the CNN, Gallup and NBC News/Wall Street Journal polls ask the question frequently enough to give us a rough comparison to a year ago. By looking at the number from just before the election, we avoid the glow that surrounded Obama after his historic win and before his inauguration.

Gallup, Oct. 1-4, 2009: 56 favorable, 40 unfavorable
Gallup, Oct. 10-12, 2008: 62 favorable, 35 unfavorable

CNN, Oct. 16-18, 2009: 60 favorable, 39 unfavorable
CNN, Oct. 17-19, 2008: 62 favorable, 35 unfavorable

The NBC News/Wall Street Journal poll asks a slightly different question:

NBC/WSJ, Oct. 22-25, 2009: 36 very pos., 20 somewhat pos., 11 somewhat neg., 21 very neg.
NBC/WSJ, Oct. 17-20, 2008: 39 very pos., 18 somewhat pos., 10 somewhat neg., 24 very neg.

By using the last weeks of the 2008 campaign as a baseline, we get a better understanding of his relative political strength, and Obama is holding up rather well amid the din. This is worth noting considering that the cries of socialism we heard during the campaign seem tame compared to the invective and epithets that have been hurled in Obama's direction in his first year in office.
As for last night's election results, Nate Silver of FiveThirtyEight cites exit polls that show Obama's strength extends to folks who voted for Republicans. In Virginia, 20 percent of those who approve of Obama voted for GOP candidate Bob McDonnell. In New Jersey, 27 percent of those who expressed approval for Obama voted to oust John Corzine.
Overall, Obama has seen his poll number fall a just few points from the last weeks before the election in which he beat John McCain 53 percent to 46 percent and 365 to 173 in electoral votes.

Lester Brown Reports Carbon Emissions Have Dropped

Lester Brown of the Earth Policy Institute reports that U.S. carbon emissions have dropped nine percent in the last two years.

For years now, many members of Congress have insisted that cutting carbon emissions was difficult, if not impossible. It is not. During the two years since 2007, carbon emissions have dropped 9 percent. While part of this drop is from the recession, part of it is also from efficiency gains and from replacing coal with natural gas, wind, solar, and geothermal energy.
The United States has ended a century of rising carbon emissions and has now entered a new energy era, one of declining emissions. Peak carbon is now history. What had appeared to be hopelessly difficult is happening at amazing speed.

A small portion of the drop could be attributed to the economic slowdown, but I don't think carbon emissions will climb again once the economy starts growing again. After all, GDP didn't fall nine percent during the recession.
Instead, we will see increasing investment in low carbon technologies like solar, wind and energy efficiency, while coal power projects are being cancelled. This doesn't mean climate legislation isn't needed. CO2 is still accumulating in the atmosphere. What this news means is that it is possible to shift our civilization away from carbon.