Thursday, April 4, 2013

Electricity, cars, and mass transit

I am looking at the cost of energy today and thinking of how to bring down the cost of energy so that America can attain energy security at a low cost. I am looking for domestic use, business use, automobile use, and mass transit use are the four major uses of energy I am concerned about. I have found some interesting information on this.

The root of energy is how do we produce electricity and how do we bring down the cost? I found this information which gives the cost of electricity per state in 2010: http://www.electricchoice.com/electricity-prices-by-state.php

The first thing that caught my eye is it looks like a population map. States with high populations and high population densities (like Rhode Island) have more expensive electricity than states, with only a few exceptions. No correlation between geography or political stance is apparent at a glance. This implies that demand has a large impact on the cost of electricity, score 1 for Keynes, score 0 for monetarists. The first that caught my eye is Nevada. Nevada has one of the highest rates in the nation looking at this map yet is one of the smallest states. I found that more than 2/3 of their electricity comes from natural gas. One must wonder whose energy problems will be solved through natural gas, surely not the average American! I look at Washington, Oregon, Idaho which are three of the cheapest states and see that they have very low rates, and we get most of our electricity from hydroelectric dams which follows research that shows that hydroelectric is not just sustainable but inexpensive. Texas is not as high as one would expect, an it looks like they have a diverse portfolio with most natural gas and coal according to http://www.texastribune.org/texas-energy/electric-reliability-council-texas/why-texas-is-using-more-coal-wind-and-less-gas/ which could explain why they pay more than their neighbors. New York pays more than any other state in the nation except Connecticut. I am having some trouble finding reliable information on where their electricity comes from, but this might explain why, they are completely deregulated. You are never going to have a lot of electricity providers in one area, and without government regulation it is apparently harder to get accurate information. Also, there will never be a perfectly competitive market for electricity unless if everyone started putting solar panels on their roof, which is unlikely given misinformation and lack of marketing of next-generation solar panels. Illinois is another state I am looking at and I found that Illinois is completely unregulated which follows a trend I am seeing. In the county I live in we pay far more than the county next to us. Why is this? We both get our electricity from Bonneville, we are only a half hour drive away from each other, but the county I live in gets its electricity from a private company based in Australia and my neighboring county has a public utility that maintains their electricity. Their service is just as good (if not better) and their rates are far lower. The graph I shared shows I am starting to see a clear correlation that the most important part is controlling monopolies that provide a public good that people need to live in civilization without seeing rising costs above the rate of inflation. This probably explains why West Virginia paid 6.63 cents per megawatt while neighboring Maryland pays 11.77 cents per megawatt in 2010. One reason I suspect Washington pays less than Oregon is we have regulations on private utilities for their rates while Oregon does not. http://www.publicpower.org/aboutpublic/staterestructurlist.cfm is an excellent resource. West Virginia pays the lowest rate in the nation, and have price controls.

Phew, so that's the information I can find on why we pay so much for electricity in some places but not in others, which reinforces my opinion that we need to have public power with regulation to prevent private monopolies from jacking up the price of electricity, which they can when there is no regulation as we see in New York, Illinois etc. After dropping the price of electricity we need to look at producing energy for mass transit and energy for private cars etc. as a national security concern. Experts are looking at producing hydrogen at lower costs, and the DOE is looking into decreasing the cost to make our transportation fuels domestically available. Once the technology to cheaply produce hydrogen is available, which I expect and hope for in the next 7 years, then it will make sense to move over to hydrogen for our fuel of choice. We need to make it domestically producible at the station that will dispense which will cut the cost and create economic growth for all Americans by decreasing costs. I don't see a system where hydrogen will be trucked into stations, but I do see a system where the station will produce it on site eventually, which will further decrease costs by making stations compete with each other driving the cost down. This will be good for the American economy. Some people who drive mostly short distances may choose to get an electric car with a limited range, and having a plug-in electric/hydrogen hybrid makes a lot of sense to conserve hydrogen so people don't have to refuel as much (I frequently drive a Prius and it doesn't have to be refilled as often as any other car I have been in.) which is good for everybody. As these cars become older and more available the prices have dropped substantially which I expect they will continue to do.

Then it comes to mass transit. First, it makes sense from an efficiency standpoint to heavily invest in AMTRAK and local light rail, according to the DOE. By decreasing the cost of electricity the cost of mass transit that runs on electricity will drop. I see no reason why we couldn't adapt a fuel cell on a train once we have decreased the costs of attaining hydrogen in a useful form which then would decrease the cost of running a train, and there is no reason they would be limited to 55 MPH which most AMTRAK trains currently go at, but could go fast enough to be competitive with the freeway. By making railways public we would decrease costs for AMTRAK and allow freight train companies to compete with each other which will bring down the cost of freight, reward companies for being ingenuitive (which they have little reason to now given how trains are the least expensive method of transportation when done right) and make our economy better. It would allow smaller freight companies to enter the market (like the trucking market) which would be good for the American economy, and allow each company to go anywhere they want to. They would be regulated like trucking companies in that they can go wherever they want, they just have to be licensed for a reasonable fee per car so that the railways can be maintained by AMTRAK which will absorb that duty. The licensing fee will go directly to AMTRAK operations. If another train company formed to compete with AMTRAK for passengers than that would be legal, albeit unlikely because AMTRAK will hopefully be maintained in such a way so that they won't be able to get a substantial market share because AMTRAK will be well maintained. AMTRAK releases a report every year reporting on different aspects of their business, and it runs a deficit every year. Good news is that ridership for AMTRAK increases every year, so it is possible that in the future AMTRAK might be able to make a surplus with good management in the near future. None of the expenses I see seem to be extraneous. I have a few ideas on how this can be fixed. AMTRAK ran a deficit of $1.342 billion in 2011. In 2012 it ran a deficit of $1.239 billion.
  1. My first and second points of this article will decrease the costs of running trains and decrease AMTRAK's vulnerability to rising fuel costs as they report in their 2011 report.
  2. Due to the politics of this country, we need to move towards a system where AMTRAK can operate without additional government funding, and ideally towards a surplus that can be reinvested to improve AMTRAK service. Making faster trains that get people to places faster than driving will be key to increasing revenue so that people will decide to take AMTRAK for longer trips (like Seattle-Portland, San Francisco-Los Angeles, Dallas-Houston etc.) that will increase revenue through ridership.
  3. Make the regulations on AMTRAK reasonable so that there are no extraneous costs that hurt the country.
  4. In 2011 they had 30.2 million passengers, who paid AMTRAK $2.15 billion which equates to an average payment of approximately $71 per passenger. It would take an increase of 22 million passengers paying this average for AMTRAK to break even, or an increase of 60,000 passengers per day to break even. An average of 82,000 passengers rode AMTRAK every day in 2011, so this means an increase of 73% is needed to make AMTRAK profitable. The easiest way to do this would be to make services more efficient and faster to increase ridership.
  5. Looking over a four year period, 2008 through 2011, a few things become clear, the deficit has risen by $200 million.
    1. Passenger related revenues are at an all time high and it reasonable to expect them to grow, rising by 10% over the past 4 years (2.4% annually). This will close the gap eventually if the trend continues.
    2. Commuter revenues are steadily increasing.
    3. Interest expenses are decreasing, this will help decrease the gap.
    4. Salaries, wages, and benefits are most of the increase at $322 million, but if AMTRAK lays people off it won't be able to function, so this is not the answer to their problem.
    5. Fuel, power, and Utilities dipped during the recession but are rising again, this is one big risk to AMTRAK.
    6. Material costs rose by $9 million or 4.5% of the increase in the deficit.
    7. Facilities dipped in 2011 after a three year rise, or 15% of the increase in the deficit.
    8. Advertising has increased as an expense, but it is not clear how much this has helped ridership, and contributes to 10% of the increase in the deficit.
    9. Casualties decrease as a cost every year.
    10. Depreciation has increased by $100 million or 50% of the increase in cost. If AMTRAK is going to grow depreciation has to increase, so this also isn't the answer to the problem.
  6. Buying new trains and periodic replacements will decrease depreciation costs. http://www.amtrak.com/ccurl/778/373/Amtrak-Covers-88-Percent-of-Operating-Costs-ATK-13-022.pdf
  7. The services with the highest operating loss mostly serve the Western part of the United States. Investment is needed to ensure that a large number of western trains can decrease their lost revenue in order to improve their profits. This can be done by investing in new trains which although that will take a lot of money in the beginning, running faster trains on the long western routes will probably increase ridership which will be good for both environmental and economic reasons for this country.
  8. 2012 saw a massive change in the amount of revenue AMTRAK was able to cover. In fiscal year 2011 AMTRAK made $2,152,020,000 from passengers, but in 2012 AMTRAK made $2,269,167,000 which is a substantial increase. 2012 also saw AMTRAK's deficit decrease by over $100,000,000 which is substantial. Things are looking good. Hopefully this change from operating in a larger deficit every year but a diminishing deficit not be a blip but a new trend for AMTRAK towards an eventual surplus that will allow them to not require other federal funds to operate, which could be cut at any time by the federal government.
An important point in the necessity of AMTRAK is that access to intercity buses has diminished rapidly in a large number of states over the past decade. This gives AMTRAK new areas where it can move in and make revenue. Their Five year plan doesn't agree with this, but it is possible that they could with some reasonable investment get the increase in ridership they need. I feel confident that by continuing to increase in new trains to increase speed AMTRAK will increase ridership which will turn the deficit into a surplus.

Source for Amtrak data, along with Audited Consolidated Financial Statements

This is being done right now. The future is bright.

After making AMTRAK sustainable and more convenient (for I don't think there is a choice between the two) we will need to increase investment in local mass transit systems. This will have two major effects on this country. First, there will be less traffic congestion in major cities which is a major drag on our economy. Second, people will be able to do entire trips using self-sustaining mass transit which will increase the options for tourists in this country whether they are citizens or foreign tourists. This is good for America.

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