Saturday, July 2, 2011

Green from A to Z?

AstraZeneca (AZ) a pharmaceutical company in Wilmington, Delaware is embarking on being green in their electric usage. The company press release this week is as follows:

“Biopharmaceutical company AstraZeneca has completed a 7,300 solar panel installation project at three structures on its Wilmington, Delaware, campus. The 1.7 MW solar photovoltaic system is expected to produce 2.1 million kWh/yr of electricity, and reduce CO2 emissions by 1,200 metric tons a year, the company said. The $9.5 million project was eligible for about $2.4 million in federal and state grants.”

Great news from a great company making life saving drugs or is it? My economic analysis is as follows: The 2.1 million kilowatt hours per year would have had 881 tons of CO2 emissions had the power been generated in a state of the art combined cycle natural gas power plant. AZ is in the pharmaceutical business that should return a 4 year payout on investments, the government should reap a payout on tax benefits in 10 years. Hence the system has a capital recovery cost of $2,015,000 per year. AZ could have bought the power at 10 cents per kilowatt hour and would have spent $210,000 per year paying their utility company. The net cost to AZ and the tax payer who subsidized AZ is therefore $1,805,000 per year. Dividing this cost by the 881 tons of carbon dioxide saved each year, we get that this project had a marginal cost of $2,049 per ton of CO2 emissions saved.

This is even higher than the Bloom Box and the Tesla roadster. This is perhaps the dumbest use of scarce capital in the time of a recession when AZ just laid off 550 people at the Wilmington site. AZ should be in the business of discovering new wonder drugs to save people’s lives and lessen their suffering. AZ should not be in the business of installing a dumb PV system that only yields nameplate power for 1,235 of the 8,760 hours in a year. Perhaps Wilmington, Delaware is always cloud covered or the site is poorly oriented toward the sun, but some manager high up in AZ should have done the above analysis and realized that this project is a waste of their shareholders money as well as a poor use of taxpayer funds.

Bloomberg is likewise installing a PV system on 7 acres at their site in New Jersey. Perhaps this site will yield power for more hours in the year than the AZ site in Delaware. But it too is not in the Mojave Dessert and it too will use tax payer funds. Bloomberg is a private company and in the news business and is not a drug company so if the Mayor of New York City wants to waste his own money more power to him. I think he is rich enough that he should not take grants from the tax payers who are strapped for cash. The government should concentrate on education and providing healthcare. AZ should concentrate on discovering wonder drugs. Bloomberg can do whatever he chooses to do with his own money, and I will simply report how the laws of thermodynamics translate into the costs of avoided carbon dioxide emissions.

Greece has a major austerity program and it is time form the US, Delaware, and New Jersey to do the same. There must be Greeks in Minnesota as that State has shut down its government. If it was not so cold in the winter and the summer was not so full of flies I would move to the Twin Cities. Talking of flies here is a question. If a fly loses it wings is it called a walk? I know this is a stupid childish joke but so is placing 1.7 megawatts of PV cells on a site in Delaware to yield only 2.1 million kilowatt hours a year by investing $9.5 million. AZ is not getting a walk they are getting a strike out.


  1. You write that government should concentrate on education and health care while also calling for austerity. Ironically and sadly the two areas that are being hurt the worst by austerity are education and health care.

    A recent cut in WIC funding providing nutrition for low income pregnant women and infants is an example of the idiocy of austerity in touch times when it's not targeted intelligently. Funding was cut by almost 25% which will deprive a few hundred thousand at risk women and infants of much needed nutrition. Instead we will see far more premature births and associated problem as well as far more frequent hospitalizations of infants at a far greater cost to the taxpayer than the money that will be saved.

    And BTW, austerity will sink the Greek economy. Greek govt bonds are currently at about 26%. With a contracting economy there is no way they can ever repay those bonds at those rates. Rather restructure their debt instead of another bailout to repay those debts and use that money instead to get the Greek economy moving again.

    Austerity in the US is the last thing the economy needs. A recent study showed that in states that haven't cut spending, private sector employment rose 1.2% relative to the national average while in states that cut spending, private sector employment fell 2.1% relative to the national average. When 20,000 teachers are laid off that's 20,000 families that stop spending money. That affects businesses negatively.

  2. Hi PAC I hope PAC does not stand for a Political Action Committee as that is the problem with government. There is austerity and then there is austerity. Laying off teachers is dumb, not feeding kids is dumb but giving ethanol subsidies and PV subsidies and fighting two wars with folks who want to be in the 12 century is extremely dumb. We need smart government and smart kids. We don't need AZ or Bloomberg getting money for a PV system We don't need ADM getting money for bio ethanol. We don't need to save the French banks who loaned to Greece. Greece needs to cut their wages and to stop hiring more people into government. The Greeks hoped to live off of the Germans hard work just like the parasites in our local state and federal government want to live off of our hard word. The way those parasites continue to remain in place is via the PACs and the special interests that get money back for their pork. The states that could increase spending were previously run by fiscal conservatives while the states that had to decrease spending have been run into the ground by fiscal nincompoops.

    Time for the Greeks to work and America to drink Green Tea. The old party is over and it is time for The Green Tea Party