Thursday, October 08, 2009

Constraining Economic Growth in Michigan

An article by Sven Gustafson at Mlive helps to illustrate why things are so screwed up in Michigan and why they are very unlikely to get unscrewed any time soon.

Support for a pair of coal-fired power plants that could create thousands of construction jobs in Michigan is running headlong into opposition from supporters of moving the state toward green energy as a prime economic revitalization strategy.

Hundreds of blue-collar union workers rallied earlier this week at the state Capitol in Lansing urging the state to approve coal plants proposed by Consumers Energy in Bay City and Wolverine Power Supply Cooperative Inc. in Rogers City. The latter plant won a $2.7 million federal grant to test carbon capture and storage technologies intended to prevent greenhouse gas emissions.
I think it is telling that the public conflict that is being reported is between two normally aligned elements of the progressive movement--the environmentalists and big labor. As much fun as it is to watch leftists eat their young, this is a sorry state of affairs, and helps to indicate why Michigan has lost its economic footing.
"We can't bring other business to the state without a stronger power base," Jim Dawson, an unemployed Iron Workers union member from Flint, told the Lansing State Journal. "Until alternative energy can supply what this state needs, these plants are crucial to the survival of Michigan."

But regulators have questioned the need for the new plants at a time when utilities including Consumers are forecasting diminished demand for power. And Gov. Jennifer Granholm has stated her preference for developing wind and other forms of renewable energy.
How shocking is it that forecasts for future power needs are being reduced at a time when the economy is in its worst recession in decades? This is not a lot different than projections that suggest sun dress sales are slumping while failing to notice that the weather stinks around here in October.

The reduced need for power that has been forecast will not last forever, and we should not wait until the power is actually needed before we try and build something. Determining the best time and place for increased energy generation capacity is the specialty of energy company forecasters and not that of government or of special interest groups. When an automobile company decides it wants to build a new factory somewhere, it is the motor company itself that stands the best chance of predicting correctly when the move needs to be made. The same thing is true of beef jerky producers, widget manufacturers, and even (gasp!) power companies. When the government figures out how to do so much as deliver mail efficiently I'll start taking stock in their opinions on delivering mail. I'm going to hold off on energy generation capacity if you don't mind.

Delaying the development of energy production infrastructure, which is exactly what leftists want to do, will place a bottleneck on future growth when economic conditions finally do begin to turn. Concerned leftists habitually toss out the old chestnut that oil fields opened for drilling today are irrelevant because the oil they produce cannot be harvested for several years down the road. This is a well established leftist strategy that aims to defeat unblessed industry through the masterful weaving of a catch-22.

New coal plants and oil fields are discouraged or stopped outright because they are currently not needed. When economic conditions improve that would place extra demand on energy capacity, there is not enough inexpensive energy available because development was not allowed before it was needed. When the power is needed, the building of coal plants and the development of oil fields is scoffed at because it will take too long to develop them. Then, when the economy bottleneck forms again due in part to energy shortages, there will be no need for the new plants because there is not a sufficient demand. Its not an awful lot different that arguing with a five year old except that a five year old produces fewer and smaller tears.

Hey, I've got a great idea. Why don't we let specialty businesses do what they do best and then we can can all sit back and share in the rewards of an economy that clicks along on all cylinders. Well, either that or we can let central planners shoehorn whole industries into the business models that run contrary to economics and human nature.

That won't work, of course, but the good news here is that if energy companies are forced to satisfy all of our needs through green sources only, we simply won't need that much power anyway.

This prediction game isn't all that difficult.

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