Where the money's gone (was: Re: P2P microrant (in honor of the P2P conference :-) ))

From: Jay Gooby (jay@futureplatforms.com)
Date: Wed Jan 24 2001 - 06:18:41 PST

"Adam L. Beberg" <beberg@mithral.com> said:

> Besides, haven't you heard, all the money is in biotech now.

I thought it was all in Power...


Thirteen Ways of Looking at a Blackout
Bruce Sterling on the origins, the outrages, and the lessons of
California's energy muddle.

CALIFORNIA'S ENERGY CRISIS: what a fantastic muddle. Bits versus
atoms. Clicks versus bricks. It's very 2001 -- all about the New
Economy getting hauled from its Volvo and curbstomped by the Old
Economy. California's problem is that energy is not bits. You can't
burn bits to keep warm. A natural gas pipeline is not the Internet
Cloud. There are networks, and then there are networks. This is what
comes of trustingly treating a rusty gas pipeline like the warm and
kindly Internet.

California runs on natural gas pipes, not fiber optics. On the
Internet, you can produce all the bits you want and shuffle them
around at the speed of light -- sort of. But natural gas isn't bits
and it doesn't get "produced." It gets extracted out of big dirty
holes in the ground, and then shipped in big glugging rusty pipes.
That's the story.

The "free market" doesn't even enter into this discussion. OPEC is a
cartel. OPEC is 105% market friction; market friction is why they
exist. The fossil-fuel business is the Old Economy at its most
primeval and piratical. It's not run by dot-com guys in moleskin
slacks and polo shirts. It's run by genocidal warlords in berets.

Which is not to say that this crisis is lucid, clear, and simple. On
the contrary, this is California in one of its bad karma moments: a
seriously weird scene. Steve Peace, the state senator who authored
California's 1996 deregulation bill, is also the guy who produced the
daffy sci-fi parody, Attack of the Killer Tomatoes! While the
governor, Gray Davis, was trying to patch the crisis together, a
suicidal lunatic tried to assassinate him. This maniac drove an
eighteen-wheeler milk truck straight up the steps of the State Capitol
at seventy miles an hour. So while the State Assembly passes its
emergency bailouts, California's Capitol is cracked, patched, and
stinking of charred flesh and gasoline.

But those are mere tinsel threads in that glamorous cultural tapestry
that once gave us Reagan and Sonny Bono. For a deeper understanding,
a situation this severe requires a list. Here's what has gone wrong in
California, in more or less direct order of crisis-hood. Some of these
things may be dealt with in a big hurry, given political genius and
generous bankers. Others are going to hang on for years.

1. California's utilities are practically bankrupt. The reform
required them to sell voltage at fixed prices while they bought fuel
at market spot prices. This goofy market worked out kind of okay in
'97, '98, and '99, more or less like the NASDAQ; but it went totally
nuts in 2000. California's utilities have lost billions and billions.
They owe it to people who (a) aren't Californian and (b) aren't
kidding about collecting that debt.

2. California's spot market is a botch. If any player refuses to sell
gas, even for a little while, then prices explode. In today's tight
market conditions, nobody has to sell California any gas. This means
that gas suppliers can game the state's gas market like big-oil cats
double-clicking a digital mouse.

It's even worse at the moment, because nobody wants to sell to
bankrupt utilities. Californians do have fuel now, but only because
the feds are forcing people to sell it to them, with emergency orders.

3. In California's dreamlike utility business, marketers are supposed
to be cleanly divorced from generators. Electricity marketers are
supposed to compete on price, service, and flashy logos, just like
dot-coms, while the electricity generators stay in their obscure, Old
Economy coalmines, sort of like mythical tommyknockers. But clean,
sizzly voltage can't be separated from that dirty, stinky fuel.

This na´ve practice meant unilateral disarmament. California's
generators got bought up by "pirate generators" from out of state. Now
these fuel moguls have got the state totally over a barrel,
OPEC-style. Nobody knows how to make them give those generators back,
either. They ain't gonna. They bought that hardware legally, and at
this point, anybody with a generator can turn California on and off at

4. There's no clear direction for reform. Since the deregulation bill
passed unanimously, no politician gets to be the white knight.
California's shattered utilities have nobody to blame but themselves.
It's not like angry populist consumers chased them into this mess. Oh,
no: Instead, they lavishly greased the palms of the State Assembly,
got a friendly bill passed, and now they're getting clobbered by their
own script. Normal people hate them and want to see them die.

5. California's got a severe case of NIMBYosis. The state's power
system is neglected and decrepit. Californians fear power plants on
principle; they loathe them so much that they don't even want to
replace their old, filthy power plants with new power plants that work
better and are sort of okay. Case in point: Cisco moved heaven and
earth to make sure there was no ugly power plant near their sparkly
new headquarters -- even though Cisco's main products, Internet
routers, suck voltage like steel mills.

6. California has had a big boom, a second gold rush. The population
is thriving and living large. So there really, truly are genuine power
shortages in California. The shrimpy transmission towers just can't
supply half a million eager new consumers every year.

7. It's hard work building fossil-fuel plants. That's not
plug-and-play hardware. We're talking years of big dirty bulldozers
and hard hats. Oh, and power plants look ugly, they smell, they lower
real-estate values, and sometimes they blow up.

8. There aren't enough gas pipelines, either. California's sucking
its gas through long, rusty soda straws. If even one pipeline shuts
down somewhere in distant New Mexico, gas prices in California go
nuts. Now try to imagine routing hundreds of miles of those babies
through the high-rent districts in Marin, Beverly Hills, and Silicon

9. California's neighbors are losing patience. They've got their own
power problems and are tired of underwriting California with their
voltage. Five governors of neighboring states just wrote Governor
Davis telling him to quit whining and just build more power plants.
The feds feel much the same way. The Northeast may brown out pretty
soon, but so far, California is finding a distinct lack of solidarity.
"But our fabulous economy will tank and everyone will go to work in
other states." Yeah, so?

10. Everybody's trying to spin the crisis. President Bush just
couldn't resist the urge to give the back of his hand to enviros.
Particularly egregious: Sinister coal-company operatives who loudly
claim you can't run the Internet without coal trucks. The Internet
uses energy all right, but its demand is zilch compared to air
conditioning. Utility demand is all about weather. As for coal, it's
actively poisonous.

11. It's a cold winter. Gas is in stiff demand this year. Worse for
California, it's a dry winter in the Pacific Northwest. Normally
there's a lot of cheap, clean energy running through hydroelectric
dams in the winter. It's just not there for California this year.
It's sorely missed.

12. This is the weird one. It may be cold now, but it was 109 degrees
in northern California this summer. It's not supposed to get that hot
in San Francisco, ever. Climate change is a genuinely new, freaky
area for utilities. This is a winter blackout, but in winter,
California can cruise by on a mere 33,000 megawatts. Summers require a
whopping 47,000 megawatts, and summers with crazy greenhouse heat
spikes are off the scale. Energy networks just plain break when you
run heavy loads in crazy heat. Right now, California has 10,000
megawatts of its capacity up for repair.

13. This is unlucky 13, the grand finale. Californians feel lambasted,
defrauded, and bamboozled by Old Economy "pirate generators" such as
(let's name names here) Reliant Energy, El Paso Energy, Dynegy, Duke
Energy, AES, Southern, Calpine, and Enron. But Enron in particular is
George W. Bush's favorite company in the whole wide world. James W.
Baker is Enron's lawyer. The Pirate Generators own Washington. The
Information Superhighway is suddenly yesterday's news, somebody else's
concept, all hype and ozone. The NASDAQ is in the tank, while the
utility sector is the new darling of Wall Street. Furthermore, it very
much galls the new administration that the homeland of Reagan is
currently run by Democrats. An economic crunch in California is the
prelude to a political assault from Washington.

On the plus side, Californians have themselves convinced that they are
amazingly inventive, clever, and technically skilled. It's pretty easy
to do that sort of thing in a rain of cash under Hollywood stage
lights. Doing it in the dark in a recession is a dead-serious test of
mettle. Let's be clear about one thing here. The Old Economy energy
network is not anybody's friend. It's a ruinous, destructive cartel
spewing greenhouse gas, an ugly blight that's slowly roasting the
planet and California in particular. Bright-eyed Californians have
foolishly handed over control of their vital energy network. But
California also generates twelve percent renewable energy, more clean,
green energy than any other state in the Union.

It's said that "gold rushes finish ugly." But California has finished
off a couple of world-class gold rushes, while somehow remaining
glorious California. So far, anyhow.

Good luck, Golden State.

Future Platforms :: Internet services for consumer devices
+44 (0) 1273 699529 jay@futureplatforms.com
Unit H, 86 Gloucester Road, Brighton, BN1 4AP

This archive was generated by hypermail 2b29 : Fri Apr 27 2001 - 23:19:02 PDT