2015/04/30

The Violence Inside

Earlier this week I had an emotional meltdown over Freddie Gray's murder and the subsequent events in Baltimore. I wrote several tweets that were openly calling for the death of cops. I'm writing this blog post not to retract those comments, but to explain them.

The police mutilated Freddie Gray's body in a way that I can't even comprehend the physics of. I know the police can be animals, but that level of horrific brutality shocked me to the core. Not only were several cops were involved, but we know from cases like these that even cops not directly involved will lie and cover up for their co-workers and that prosecutors and attorneys general will avoid any punishment for the cops whatsoever. The Coup has a line: "Every cop is a corrupt one." Absolutely true.

Every cop is a bad cop, because they all support this kind of brutality. "Police whistleblower" is an oxymoron – cops do not testify against other cops. Cops are, in a sense, not individuals. Becoming police means becoming a part of a mass that has no true understanding of justice or fairness – it is a depersonalized, sociopathic force to maintain the existing social order.

Thinking about how the Baltimore police mutilated Freddie Gray's body ignited a murderous rage in me. I wanted to see cops killed. I wanted to kill cops myself. I still do. I want to watch a cop's blood pour out into the gutter. I have seen fear in a cop's eyes and it is a beautiful thing. But now I fantasize about watching the light fade from those eyes.

This very hateful and violent impulse is a scary thing to face in myself. But I see no value in denying it. It's there, the mirror image of the sickness that the cops carry, that they give into. It has been one thing for me to read Martin Luther King Jr.'s words about how violence leads only to violence, and how hatred only leads to more hatred. It was one thing to become angry at the police and realize that that is a deliberate effect of state violence.

It is another thing entirely for me to personally plunge directly into the abyss, to not just intellectually think that someone should be killed, but to passionately desire their brutal death. I grapple with this twisted fact that the very evil I see in the world and fight against, rises up inside me and that my own strong drive for justice can become poisoned, taken over, transformed into the very thing I detest.

This has led me to go back to some of Martin Luther King Jr.'s words, particularly his Pilgrimage to Nonviolence. His six basic points about nonviolence are not easy. They can be very, very difficult. While I still wouldn't rule out some kinds of violent action in order to get to a better world, my intense reaction this week reminded me to go back, again and again, to these fundamental points, in particular the fifth point. It is a struggle for me to avoid the "internal violence of spirit", but its appearance has been a lesson for me.

2015/04/14

Investing to Support the Clean-Energy Revolution

While I'm definitely anti-capitalist, for the meantime, capitalism is the social form we have. So I am investigating the best ways to limit climate change within that system, while at the same time looking to overcome it.

One way to work within capitalism is in the directing of your money, both as a consumer and as an investor. Here are the results of my research into some "green" ways to invest.

Financing installation, not companies

I am focused on directly financing the rollout of existing clean energy technologies – primarily wind and solar – rather than financing R&D or buying stock in clean-energy companies. Since I still work full-time, any investment income is taxed at a high rate. But most of the investment instruments that finance the direct implementation of these technologies are income-generating assets (which makes sense). Therefore I am specifically looking for things that I can buy through my retirement accounts.

In any case, most of my investable money is in my retirement accounts (IRAs that were rolled over from 401k funds). I have them all at Vanguard, and it's easy to set up a brokerage account. From there I can buy anything publicly traded.

YieldCos


The main type of investment I've invested in (of the money devoted to clean energy) is the YieldCo, a relatively new type of investment that provides a steady stream of income. The idea is that the YieldCo effectively owns income-generating assets like wind farms and solar installations and distributes most of the income as dividends. YieldCos buy these assets from developers; the developers can then take that capital and use it to build new wind farms and install more solar. Usually each YieldCo is closely tied to one developer, which does raise the potential for conflicts of interest.

I did some investigation into some of the available YieldCos. I picked a few for purity and yield (like meth). By yield of course I mean how much the dividends amount to as a percentage of the purchase price. By purity I mean how much of their assets are in clean energy. One in particular, NRG's YieldCo, has a high percentage of dirty energy assets (natural gas power plants and even coal power plants) in order to have the tax equity to take full advantage of the federal Investment Tax Credit available for solar and wind. While I understand the rationale, I'd prefer my money to be used to fund as close to 100% clean energy as possible. And as you can see, it's quite possible:


This graph is from an absolutely excellent overview (about a year old) at Forbes called Clean Energy Yield Cos: Growing Pains.

2015/04/08

Dinosaur Mating and the Endgame of the Fossil Fuel Era

The Fossil Fuel Endgame

It is my contention that we are currently witnessing the beginning of the end of the fossil fuel industry.

After years of high prices for crude oil (~$100/barrel for Brent, just under that for West Texas Intermediate), prices starting falling in late summer 2014 and have been sitting for the past few months at just above half their former prices. The proximate cause of this fall is the decision by the Saudis to go after market share rather than keep oil prices high.

I believe this decision marks a turning point in the history of oil. It's not short-term but permanent.

The average barrel of oil has become more difficult to extract over time, and oil prices have risen accordingly. The Saudis are sitting on enormous reserves of cheap-to-extract oil, and have benefited from the increased prices. A couple of years ago, their reserves looked like a steadily appreciating asset - worth more in the future (when oil would likely be more expensive than now).

However, we have two major new factors: renewable energy is rapidly decreasing in cost, and real climate policy in the major economies (US, China, EU) looks inevitable. Now oil is likely to be less lucrative in the future - and most of it will have to be left in the ground. This graph shows just how dramatically the price of solar has dropped in recent years (wind has seen similar though less dramatic improvements over time):


That means that oil is now a depreciating asset and it makes financial sense to sell it now, even at historically cheap prices. It's like a gold rush in reverse, as the endgame of the fossil fuel era plays out. The Saudis have single-handedly cut the price of oil in half and have announced their intention to push prices lower if need be. So oil prices won't be going up any time soon.

At today's prices, Canadian tar sands projects are totally untenable, and Bakken shale oil is marginal: oil will continue to flow from existing wells, but new wells will only tap the most productive spots. This means that the need for North American crude-by-rail will dry up over the next year or so. In particular, we've seen the Pittsburg WesPac project be re-proposed, but this time without the rail terminal. And the Kinder Morgan crude-by-rail terminal in Richmond, CA apparently stopped receiving shipments in February 2015.

Dinosaurs Mating

Recently Shell announced that it would buy the BG Group (an LNG - liquefied natural gas - supplier) at a 50% premium in a huge deal. Far from being a sign of a robust and growing industry, this reminds me of nothing so much as the "dinosaur mating" of the big mainframe manufacturers as their product became less and less relevant over the course of the 1980s and 1990s.

In the face of inexorable improvements in price/performance of clean energy technology, a growing fossil fuel divestment movement, and increased clamor for a price on carbon or other way to tackle climate change, I think we will see more of these deals in the future as the industry contracts and slowly dies. Our goal should be to hasten the death of this industry in order to limit the damage it's still able to inflict.

Update

This Financial Post article, "Saudi Arabia was worried about a danger much bigger than shale when it blindsided oil markets", supports much of what I say here. The Saudis are worried about the peak and then decline of demand for oil, in part because of its replacement by clean energy. If anything I think they're not paranoid enough.