Feb

10

 Welcome to New England. This weekend, there was another protest. Approximately 400 people protested a new $800 million combined cycle gas turbine to be built in Salem. Approximately 50 protested in favor of replacing the old coal plant with natural gas. This spectacle after similar protests took place at Seabrook and Pilgrim, Boston area's two nuclear units.

If you add it up, New Englanders want no coal. No natural gas. No nukes. No new transmission lines.

At the same time, New England conducted their annual auction for [power plant] capacity. IIRC, the auction came up short by about 350 megawatts, including Canadian sources.

New Englanders are getting what they want. Major coal plants are exiting. Nuclear plants are retiring decades early. Few people are willing to invest in new natural gas based power plants. No new transmission lines of consequence are being built.

In addition, since no new natural gas pipelines are being built, there is a chronic shortage of natural gas. Boston has to import marginal natural gas from Africa through LNG channels. The practical solution is to burn oil.

Energy costs are becoming a major element in household budgets. I believe New England's energy costs are affecting real estate values. It would be interesting to see any credible studies.

Rocky Humbert writes: 

Carder writes: "I believe New England's energy costs are affecting real estate values. It would be interesting to see any credible studies." Energy costs for people whose income is over $50k have already grown from 5% of after tax income to 9% of after tax income from 2001 to 2012. This is a national statistic (www.americaspower.org).

That the NYC Tri State area has both among the highest energy costs and most expensive real estate challenges Carder's theory. My guess is that this is a long cycle phenomenon and not well suited to short-term studies. The change in real estate prices are primarily a function of the short term change in employment, income, interest rates, taxes ; the costs of energy are (I believe) a much bigger deal for employers than employees.

Over the longer term, companies will presumably locate plants where there is ample energy and employees will follow and in that way real estate prices can be affected. But unless there are regular blackouts and/or reduction in net income/employment I would be surprised to see electricity prices affect real estate prices in a discernible way.
 


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3 Comments so far

  1. Ed on February 10, 2014 3:51 pm

    The activities of 400 radicals don’t really speak for New England. Unfortunately, like with so many issues, the small minority who pay attention (often with a nefarious agenda) and scream loudest set the agenda. The other obvious question to ask is, “who benefits” and look for a money trail.

  2. Andrew Goodwin on February 11, 2014 11:40 pm

    Increased prices of energy factor into an evaluation of the cost of carry of a property in New England Most buyers ask for a utility bill to estimate what they will have to pay in advance of purchase.

    In the case of my sister, who chose to live in Northern New Hampshire, in order to locate far away from government Superfund sites, she used a personal cost/benefit curve in finding her home there.

    She also used a map of the Superfund sites available at the www.epa.gov/superfund site to identify the environmentally challenged spots.

    So I can vouch for the fact that people are willing to pay more to live far away from Superfund sites when they have children and look at the government maps.

    One key to evaluate the consumer home buying decisions has many facets including energy costs and the “Green” motivation of the buyers.

    If they don’t want to locate their kids near Superfund sites, then they will pay a premium for the homes so long as they have a less elastic curve than others on the price of their fuel versus the perceived health of the local envirenment for their children.

    Economists are too ready to ascribe cost to location while ignoring the perceived health considerations key to the home purchase prices of “Greens.”

  3. matt on February 12, 2014 8:05 pm

    Relax we just figured out fusion apparently …

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