As Trump’s war with Iran enters its second month, the Strait of Hormuz remains closed. Energy markets have responded with higher oil and gas prices, which has translated into inflation across the board. Many economists and geopolitical analysts warn the worst may still lie ahead.

Nobody knows how long the Strait of Hormuz will stay closed, but each passing week increases pressure on the economy. We have never seen an energy crisis this bad before, but we can look to events like the start of the Ukraine war in 2022 to offer insights on how the economy could respond, and the effects aren’t spread evenly.

I used historical data on state electricity generation, prices, and demand, along with fossil fuel price volatility during the Ukraine war, to estimate how reliance on natural gas exposes states to geopolitical risk. While the US is more insulated from the Iran oil price shocks than countries like Japan, India, and much of Asia, the variation between states reveals how energy policy can either protect or expose consumers.

Today’s post will put this unprecedented energy crisis in context. I’ll explain how LNG prices affect electricity prices in certain states more, and how the situation is likely to get worse before it gets better.

The Strait of Hormuz Shock

Energy markets reacted when the Strait of Hormuz closed two weeks ago due to the attack on Iran from the US and Israel. As shown in the graph above, non-Iranian shipping traffic was cut off in the Strait that carries one fifth of global oil and gas supply. Despite Trump’s pleading for help from allies, the narrow passageway has remained closed except to ships carrying oil bound for China, and it’s still unclear how long shipping will be restricted.

As with many modern conflicts, early expectations of a short war have proven overly optimistic. We learned from the Iraq war and the invasion of Ukraine that there is no telling how long the Iranian conflict will squeeze oil markets. And each week that passes with the Strait still closed, the negative economic effects are exacerbated into the future.

In fact, much of the world hasn’t felt the worst part of the Strait’s closing. Oil tankers move extremely slow - about the speed of a bicycle. The last US-bound shipments that exited the Strait of Hormuz are scheduled to reach Louisiana in mid-April. This is when the real supply constraints will likely be felt.

Consequently, even if the war were to end today, it could be months until shipping resumes, and then months after that until oil and gas are delivered to end users.

But it doesn’t look like the conflict is ending anytime soon. In his primetime address on the night of April fools day, Trump vowed to “hit” Iran “extremely hard over the next two to three weeks,” suggesting we’re still at least weeks away from peace talks, or any type of “deal” to come to fruition. Trump’s word is all we have to go off of, but I’m wary to believe any signal Trump sends given his record of using a press release to influence financial markets.

And worried about the markets he is.

The fact that the US has un-sanctioned both Iranian and Russian fossil fuels, the primary war-financing mechanisms of two of America’s greatest enemies, is telling enough that Trump knows he doesn’t have the political backing to withstand higher energy prices. It also suggests he didn’t fully think this through since Russia, China, and Iran are all making more in oil and gas revenue than they were before the war started.

Trump’s contradicting energy and geopolitical policies don’t end there - domestic renewable energy production has slowed due to Republican policies. But before we get to the state of America’s grid, let’s see what we can learn from historical energy crises as this historic one unfolds.

Lessons from past energy crises

The shock that everyone is calling back to right now is the 1970’s oil price shocks that spiraled from the conflict between Israel, Syria, and Egypt. Egypt and Syria launched an attack on Israel on Yom Kippur, a major religious holiday, in 1973. OPEC producers coordinated production cuts, effectively raising prices to specifically target Western allies of Israel, who were oil dependent and net importers to varying degrees.

Famously, the US imposed gasoline price controls and nationwide speed limits in an attempt to ease the shortage, which only caused further economic issues. Despite the conflict only lasting a few months to a year, the 1973 price shock is largely blamed for the 10-15 years of economic turmoil and inflation to follow. The duality of stagnant growth and inflation led to the coining of the term stagflation (a term that has circled Trump since his infamous and illegal “Liberation Day” tariffs).

A recession hit the US, Europe, and Japan, and they couldn’t quickly turn away from fossil fuels, and so higher prices and lower output persisted into the 1980s.

The Ukraine shock

When we analyze the heterogeneous effects of the Ukraine war, we see some similarities, though the geographical energy mixes and aggressors changed. And, notably, we see that some smart European countries had insulated themselves from oil and gas volatility by investing in renewables.

A recent paper from my friend Lucien Vargas at BBVA, a bank, reports that “Spain’s renewable-based power model has increased resilience to external energy shocks, especially at the wholesale level…”

LNG prices affect electricity prices for at least two reasons: the competitive merit order of electricity dispatching, and import reliance. The merit order of electricity dispatch results in the most expensive generation input setting the price of electricity, which is often natural gas or coal. And the degree to which a country is reliant on another nation’s natural gas helps set the price they’re willing to pay for it. The US, today, is the world’s largest producer of oil and gas - meaning the US, as a whole, is less affected than Asia or Europe. But electric grids within the US aren’t totally immune to price swings, and they’re affected unevenly.

Natural gas in America

Since 2017, the US has been a net exporter of oil and gas, so the closing of the Strait of Hormuz is, so far, less economically damaging than the 1970s crisis. Technological advancements in fracking opened up fossil fuel assets in the Permian Basin, giving the US a boost of energy. This domestic strength could have given Trump the impression that the Strait of Hormuz closing wouldn’t be that big of deal for the US, but the negative effects are still there.

US gasoline prices are now around $4, and we should expect higher prices in everything from groceries to electronics to travel, and more. Forecasts for the Henry Hub, which serves as the benchmark LNG price coming out of North America, are fairly steady over the short term with expectations for slightly higher prices over the long term. But global market dynamics could play out to hurt America as demand for natural gas increases globally.

Volatility can happen at any moment. The Ukraine war led to a natural gas price spike in the US, and an unexpected cold snap in the northeast led to another spike in early 2026, weeks before the Iran war started.

If demand elsewhere exceeds the US’s ability to resupply itself, Europe, and Asia, prices could surely rise. Even the most insulated natural-gas-producing country in the world isn’t fully removed from global markets.

Estimating LNG’s effect on US electricity prices

Like we see on the international level, LNG prices affect US states unevenly. Spain’s investment in renewables insulates them from geopolitical conflicts, and US states that are un-allergic to clean energy are also insulated. I built a regression model to illustrate these effects.

I estimated how electricity prices reacted to the Ukraine invasion by regressing monthly state-level prices on the interaction between the state’s pre-war LNG generation share and an indicator for the period after Russia invaded Ukraine. I control for electricity demand, include state-level fixed effects to account for differences between states, and added year-month fixed effects to account for nationwide trends.

Here’s the math for the nerds:

Where:

The key coefficient, β, measures how much more electricity prices rise based on each state’s reliance on natural gas to power their electric grid. I then used this coefficient to predict how future price increases will affect the grid in each state using the following equation, which assumes gas prices rise $1.50 (Henry Iran).

I also assumed grid mixes haven’t changed too much since 2021, meaning the effects could be slightly overstated, but a price shock of just $1.50 is smaller than historical price shocks, and many state’s grid mixes haven’t changed too much.

All in all, it’s a back-of-the-envelope model that proves an important point: states with less reliance on LNG will be less affected by the Iran war and other future conflicts.

The map below illustrates my findings. The darker the red, the more electricity prices will increase in response to a $1.50 LNG price increase.

And here are the predicted percentage price increases shown as a comparative bar chart.

These aren’t necessarily graphs showing the dirty grids and the clean grids - just the gas-heavy grids exposed to LNG price shocks. Coal-heavy Wyoming is less affected by LNG prices than wind-heavy New Mexico because Wyoming simply uses less gas, relatively. And Hawaii is likely even more affected by the closing of the Strait of Hormuz because they rely heavily on oil to power their grid, though they’re expected to decarbonize moving forward.

Many countries are now considering extending the life of their coal-powered plants in response to recent geopolitical shocks - a bad thing for the climate, but more of a band-aid than a real solution. While coal-heavy states can be less exposed to LNG price swings, the levelized cost of coal is still much higher than most renewables.

There is a lot of nuance to consider when comparing the results of my model, but here are a few underlying facts to consider:

• Oil and gas generation exposes you to more geopolitical risks.

• Southern, Republican states are among those most exposed.

• Coal plants may help with short-term price stability, but only if you have existing plants. It’s still one of the most expensive inputs for electricity, even without considering the social cost of carbon.

• Wind gusts and solar rays don’t have to traverse the Strait of Hormuz.

Between Trump’s decision to back Israel’s attack on Iran, and his anti-renewable, climate-change-denying domestic policy, smart energy policy has really been left to the states. For the past 10-20 years, we’ve been witnessing a separation between the states that do, and the states that don’t, have a plan for the future of energy. Tomorrow’s economy will be built on data centers; electrified manufacturing, transportation, and homes; and a resilience to geopolitical pressure. Some states will win in that economy, and others won’t.

China continues to outbuild the US in terms of renewable energy, batteries, bullet trains, and electric vehicles. US allies are realigning their own political posture considering the shifting power paradigm. The US has a lot to ponder as the 2026 midterm elections approach in November. Trump is undoubtedly worried about rising prices. If LNG prices spike, red and purple states will be hurt the most.

Dolores Huerta remains a powerful voice for the marginalized and mistreated, and it was an honor to march with her in 2024. As her legacy endures in the face of new scrutiny of Chavez, I encourage elected officials across Albuquerque, and the nation, to rename streets, schools, and celebrations that don Chavez’s name in her honor instead.

Separately, I am finishing a new post about the Iran war and it’s implications on energy and the economy in New Mexico, but in the meantime, please enjoy this one.

Avenida Dolores Huerta runs through the 500-year-old Hispanic neighborhood of Barelas in Albuquerque, NM. Just South of the street, adjacent to the Rio Grande, is the one and only National Hispanic Cultural Center (NHCC).

The NHCC is where the festivities began honoring Dolores Huerta and the late Cesar Chavez on April 13th, 2024. Dolores, one of the most influential labor activists of the 20th century, blessed the event with her presence this year - seeming to increase the energy of the crowd beginning to form on the leafy NHCC campus.

The NHCC has been hosting the Annual César Chávez And Dolores Huerta Celebration - the only celebration of its kind according to the NHCC, since 2007.

The celebration started with a good old-fashioned march through the Barelas neighborhood. There were hundreds of people in attendance. As the various organizations prepared for the march, there were traditional Native American dances, low riders sliding through the parking lot all low to the ground, and everything New Mexican in between.

The golf cart carrying Dolores Huerta, Mayor Tim Keller, State Treasurer Laura Montoya, and other important people led the march from the NHCC parking lot going North on 4th Street. My girlfriend and I tucked in behind the Carpenters Union and followed Dolores toward Downtown

As we crossed Avenida Cesar Chavez (where the road becomes Avenida Dolores Huerta), the “si, se puede” chants started fading in and out for the next hour or so.

I have walked this stretch of 4th street through Barelas plenty of times before, but it had never had the charm it did on the morning of Saturday, April 13th. In the center of the road, I had a better view of the buildings on either side. 4th Street was at one point Route 66 before it was redirected to Central and has garnered newer developments like the NHCC and the soon-coming Barelas Central Kitchen, but the street is mostly lined with some of the oldest buildings in the city - mostly vacant.

As Dolores led us through Barelas, murals and empty stores lined the streets of the inner-city neighborhood.

Dolores was born in Dawson, New Mexico in 1930. Her father Juan Hernandez, also born in Dawson, was the son of immigrants and worked in the local coal mine. He later joined the migrant labor force working at beet farms around the US and became a New Mexico State legislator in 1938. When Dolores was 3, her parents divorced and her mother moved her and her two brothers to Stockton, California.

Her father had stayed in Dawson after the divorce, and she didn’t speak with him much after she left New Mexico. In Stockton, her mother bought and ran a 70-room boarding house for farm laborers - often letting many of them stay for free in hard times. From Dawson to Stockton, Dolores witnessed underpaid immigrants working the mines and grape fields. Today, she credits learning her activist ways from her mother.

After high school, Huerta attended San Joaquin Delta Community College where she received her teaching credentials - uncommon for a Mexican American woman at the time. While teaching, she noticed many farmworkers’ children coming to school hungry.

Dolores told NPR:

The farmworkers were only earning about 70 cents an hour at that time — 90 cents was the highest wage that they were earning. They didn't have toilets in the fields, they didn't have cold drinking water. They didn't have rest periods. People worked from sunup to sundown. It was really atrocious. And families were so poor. I think that's one of the things that really infuriated me. When I saw people in their homes — they had dirt floors. And the furniture was orange crates and cardboard boxes. People were so incredibly poor and they were working so hard. And the children were [suffering from malnutrition] and very ill-clothed and ill-fed.

Dolores taught for a while and then decided she could help her students more if she organized farmers and farm workers. Like a relay - she picked up where her activist mother had left off.

NPR writes:

Huerta was 25 when she became the political director of the Community Service Organization, run by influential community organizer Fred Ross. That's where she met Chavez, and in 1962 the two teamed up to form what became the [United Farm Workers (UFW)], organizing farmworkers who toiled for wages as low as 70 cents an hour, in brutal conditions.

"They didn't have toilets in the fields, they didn't have cold drinking water. They didn't have rest periods...”

Huerta would coin the phrase ‘Si, se puede,’ giving the United Farm Workers its legendary catchphrase. While Huerta and Chavez shared leadership of the UFA, Chavez was the spokesperson of the organization - often leading to him getting more credit than Huerta throughout the years.

Leading countless marches and protests, Huerta faced violence and prejudices on the picket line - once obtaining broken ribs from the force of a policeman’s baton.

As the Downtown buildings got closer, the crowd went through waves of ‘Si, se puede’ chants, and other chants denouncing tax fraud, inequality, etc.

Dolores’ cart turned the march East on Iron Street through a more residential part of Barelas. Residents observed the crowd from their front doorways as our chants broke the silence of the quiet Saturday morning. We turned South on 8th Street where Albuquerque’s Spring views and temperature didn’t disappoint.

Barelas is the oldest neighborhood in Albuquerque, predating the city itself, and was born out of an old agricultural community at the intersection of El Camino Real and the Rio Grande. The community has seen great change over the last 500 years. As agriculture, railroad companies, and Route 66 all came and went - leaving boom and bust cycles for the now inner-city neighborhood - the neighborhood feels yet again on the brink of change.

New development is bringing life into the vacant 4th Street and Rail Yards while the city and residents wrestle with the prospects of gentrification.

We marched down 8th Street back to the NHCC campus to kick off the rest of the celebrations for Huerta and Chavez.

The New Mexican culture was palpable at the NHCC. We ate frito pie, listened to mariachis, and shouted “Que viva!” whenever necessary.

Speeches by the NHCC President, Albuquerque Mayor Tim Keller, and others all praised Dolores and the meaningful change she helped bring to people in New Mexico and around the US.

Mayor Keller, in his speech, announced that the City of Albuquerque and the State of New Mexico officially recognized April 13th as Dolores Huerta and Cesar Chavez Day - an honor recognized in states and cities across the US. Keller went on to talk about recent local achievements activists have garnered for New Mexicans like free college education, child care, and daycare - and there’s no doubt these achievements were only possible because of the foundation of rights Huerta helped establish during the labor movement.

Dolores, now 94 years old, spent most of her life marching through streets across America - achieving improved working conditions and wages for millions of migrant workers and farmers across the United States.

Today, union membership across the US is again on the rise, thanks to the efforts of new grassroots organizers across the US. But much like the future of Barelas, the future of the revived labor rights effort is yet to be determined.

New buildings will be erected, new activists will emerge, and vacancies will need to be filled, but the relay continues. Filling the shoes of Dolores Huerta and Cesar Chavez is no easy task, but last Saturday, I witnessed hundreds of young activists marching through the streets of Barelas inspired by Dolores’ run - hopefully ready to pick up the baton next.

Si, se puede!

They say the best time to plant a tree was 20 years ago. The same goes for affordable housing.

My partner and I got lucky when we purchased our first house in 2023. While searching for a suitable home within our budget, we quickly realized that our options were slim. For a while, all we could find were small, run-down, single-family-homes that needed a lot of work (to say the least). We visited many properties only to be disappointed with the options Albuquerque offered. That all changed when our current home hit the market - a decades-old townhouse in Barelas. It was within our price range, big enough for a potential family, in a neighborhood showing promise, and even had a modest backyard for our dog. We jumped on the opportunity, and after a stressful bidding war, we got on the housing ladder. Many others aren’t so lucky.

Townhomes, duplexes, and condos are, by nature, the most affordable options for those trying to get on the housing ladder. They require less land, less building materials, and less infrastructure like wires, utilities, and roads. And if it’s a couple decades old, it’s likely even more affordable. A detached home can’t compete with attached units on price even with tax credits and other subsidies. We continue to see these demand-side housing tactics fail because nothing will save us from the fact that the most affordable types of homes aren’t legal to build in most of the city.

On Wednesday, February 18th, the Albuquerque City Council will decide on a pro-housing amendment to the zoning code which would legalize townhomes and other affordable housing structures, as well as corner stores (tienditas), in more areas of Albuquerque. Council needs to approve these measures to expand opportunity in our city.

Opponents of the zoning change often say allowing duplexes and townhomes will “ruin” the character of a neighborhood - a take that is not only wrong, but backwards.

The character of many of our neighborhoods have already changed drastically because of the constraints we have put on housing development. Neighborhoods like mine are aging, and historic Mainstreets are crumbling. We’ve encased our city, especially the historic neighborhoods, in amber - unable to breathe and evolve with the changing times. We’ve locked out investment and priced out our youth. Barelas used to be a walkable, family-oriented neighborhood with a pharmacy, grocery store, and a pub. Today, despite the neighborhood’s potential, you rarely see kids playing outside, and the Barelas Mainstreet is now just a ghost-town throughway for commuters.

As homelessness persists, and home prices continue to climb, the proposed upzoning before council on Wednesday is a pressure-release valve that can help absorb some of the demand for housing. It’s not a fix-all solution, but a necessary step that would create more opportunity for New Mexicans and break off some of the amber that’s suffocating younger generations.

We can create a city where Mainstreet has foot traffic, young families are encouraged to grow roots, and people aren’t displaced or forced to the streets. I hope city council realizes that more housing is the key to reversing a declining statewide population, boosting economic development, and reducing the cost of living for New Mexicans. Not everybody is going to be as lucky as my partner and I were, so lets create our own luck and give people a shot at growing some roots in Albuquerque.

The best time to plant a tree was 20 years ago, but the second best time is today.

If you’re an Albuquerque resident, consider contacting your councilor or signing up for public comment on February 18th to show support for the pro-housing measures in bill O-26-2.

In 2001, New Mexico had with one of the dirtiest electricity grids in the US, with just 0.8% of generation coming from renewables. It ranked as the 7th-dirtiest grid by percentage, dominated by coal. Fast forward to today, New Mexico has the 9th-cleanest grid with 59% renewable generation through the first 10 months of 2025. Since 2001, only Vermont has increased renewable generation share more than New Mexico.

A blend of political will, market development, and natural resources across the Southwest helped make this happen. The Energy Transition Act (ETA) accelerated renewable development, while a pro-build stance on transmission helped New Mexico leapfrog many of its peers.

Not only is New Mexico ahead of its interim ETA goal of 50% renewables by 2025, but prices haven’t risen like critics warned. In fact, New Mexico has some of the cheapest electricity in the nation.

My last post explored New Mexico’s oil and gas dominance. This post shows that New Mexico is a clean-energy powerhouse too.

The Energy State

New Mexico ranks third among states in total share of US energy production. For a relatively small state of 2 million people, vast land and natural resources allow New Mexico to punch above its weight. With the most productive oil and gas field in the world, two of the largest wind farms in the US, high solar irradiance, geothermal resources, and a strong energy R&D community, New Mexico is a top energy state.

At the same time, state leadership has been willing and eager to advance the energy transition. While oil and gas remains the dominant industry, New Mexico is making moves to be ready for the electrification of the economy. The future of economic development starts with having a grid that can support data centers, electric cars, advanced manufacturing, and more. And, of course, it’d be nice not to ruin the climate while we grow. The Energy Transition Act (ETA) is New Mexico’s bid to achieve that future.

The Energy Transition Act

The ETA was passed through the legislature and signed by Governor Michelle Lujan-Grisham in 2019. It’s a clean energy standard (CES) which requires electric utilities to reach 100% zero carbon by 2045, and rural electric coops by 2050, with interim goals of 40% by 2025, and 50% by 2030.

New Mexico, in aggregate, has already met and surpassed its 2025 goal as the state generated nearly 60% of its electricity from renewable resources during the first 10 months of 2025.

The dominant source of energy in 2025 (through October) was wind at 30.1%, with solar and gas coming in close behind. The coal industry is still quite relevant, but was probably less relevant in November and December as air conditioners turned off, but we don’t have that data yet.

Over time, the renewable generation share keeps growing and doesn’t look like it’s going to stop.

Since 2016, the year the US signed the Paris Agreement, New Mexico’s renewable generation share has increased rapidly, with an average annual percentage growth near 20%. New wind and solar kept getting cheaper, allowing utilities to retire aging coal plants. In 2017, when the San Juan Generating Station started closing, few federal and state programs were around to support coal workers specifically, leading to job loss and unemployment into the 2020s. In 2019, Lujan-Grisham signed the ETA - establishing the Displaced Worker Assistance Fund, retraining programs, and other support specifically for New Mexico coal workers. It’s better than nothing, but many say this was too little too late.

Nonetheless, the ETA all but ensured the renewable future that was already taking shape. The fastest growing fuel type lately has been solar, which saw 248% growth over the last 5 years. Next is wind, which was the largest energy source in 2025 through the third quarter and has grown by nearly 90% over the last five years.

Comparing New Mexico’s grid to it’s neighbors, which have very similar geography and natural resource potential, reveal how policy and labor force has shaped each of their generation mixes.

The charts below give hints about how things work in different states. Arizona had the political will to build nuclear back in the 1970s, and still utilizes it. Colorado has a generation mix quite similar to New Mexico. Texas, unsurprisingly, uses a ton of their own natural gas. And Utah has a legacy coal industry that’s slowly giving way to more renewables.

One thing that’s common between New Mexico and its neighbors is the growth in solar over the last five years. The EIA thinks that trend will continue:

Increasing electricity demand is being met by higher generation from most energy sources in 2025. We expect that utility-scale solar will grow the most, generating 33%, or 72 billion kilowatthours (BkWh)... New solar projects account for more than half of the new generating capacity expected to come online this year.

Wind generation is also expected to grow - with the largest projects in the nation coming online in New Mexico this year.

According to this chart, New Mexico is also building a few more grid-scale batteries. Some of these may be PNM’s, as they plan to add 593 MW of battery storage by 2028, and approach 2 GWs of storage by 2040. That’s roughly half the size of New Mexico’s current total generation capacity today.

Utility performance in New Mexico

Within New Mexico, we see that the three big utilities have varying levels of renewable capacity. PNM has taken on the lions share of the decarbonization efforts in New Mexico with more than 70% of their own electricity being carbon free. Southwestern Public Service Company (SPS) is projected to exceed the 2025 ETA goal as well, but it may be close for El Paso Electric (EPE), who failed to meet the standard from 2020 to 2023.

While servicing two-thirds of the state’s population, PNM meets demand with large amounts of wind, solar, and batteries. PNM’s ‘Real Time Renewable Energy %’ said that 95% of PNM’s generation mix was renewable on the afternoon of New Years Eve.

The graph below shows PNM’s fluctuations over nine days in generation types, and battery charging and discharging. The afternoon of NYE, the wind wasn’t even at peak capacity.

While PNM’s solar and wind generation outpace gas and coal, EPE, servicing the Las Cruces area, is still dominated by natural gas. Large solar plants are being planned, though.

And SPS, which services the eastern edge of the state, has large wind assets in the area and an integrated transmission system integrated with Southwest Power Pool Markets+.

These graphs show where the state has room for improvement. Windless days can be fought with more batteries and inter-state trade, helping decarbonize and fight high prices.

Prices

Many still claim that renewables make electricity more expensive, but it’s not true. In a study on Chilean renewable expansion, Gonzalez et al., “find that market integration resulted in… increases in renewable generation, and decreases in… cost and pollution...”

My own back of the envelope regression shows that generation mix alone only accounts for ~3.5% of variation in prices in the US. Using monthly data across all U.S. states, I examined whether cleaner electricity generation actually drives up power prices. After controlling for state-specific factors and national trends, my analysis finds that greater reliance on wind and hydropower is associated with lower prices, and changes in the fuel mix explain just a few percent of price variation.

In other words, the evidence does not support the claim that renewables are a primary cause of higher electricity prices. Instead, prices are more influenced by a dynamic mix of geography, wholesale trade, weather, natural resource abundance, and other factors influencing supply and demand.

New Mexico’s abundance of energy, renewable or not, and relatively low demand has translated into the cheapest industrial-use electricity in the US, with 5.53 cents/kWh as of October 2025. Across all sectors (residential, industrial, commercial, and transportation), New Mexico has the second cheapest electricity in the nation - second only to North Dakota.

If renewables did somehow increase electricity prices, you’d see it in this inflation-adjusted graph of electricity prices over time in the state. Commercial, industrial, and residential customers face different electricity prices because they purchase power under different wholesale and retail arrangements, and they have all either stayed the same or gone down since 2001.

The future of New Mexico’s electric grid

PNM joined the Western Energy Imbalance Market (WEIM) in 2021, a real-time market that dispatches energy every 5 minutes. PNM has also committed to joining CAISO’s Extended Day-Ahead Market (EDAM) in 2027, helping balance short-term supply. EPE surprised many when it committed to join Southwest Power Pool’s Markets+, another day-ahead market headquartered in Arkansas. Customers of the big three utilities, and many small cooperatives and municipal-run utilities, will benefit from more competitive trade in the region.

The proposed Blackstone acquisition of TXNM Energy, PNM’s parent company, would not likely keep PNM from joining markets. However, a Colorado-style electricity market requirement would ensure market participation and add downward pressure on prices.

TXNM, PNM, and Blackstone announced the proposed acquisition earlier this year. This news has been met with frustration by rate payers as they fear the firm will increase their rates. Many op-ed’s have been published questioning the conceivably dodgy motives of Blackstone, but nobody has publicly questioned why TXNM wants to be acquired in the first place.

Today’s post isn’t about Blackstone, but (maybe the next one will be).

Today’s post is about giving the state it’s flowers because some of these accomplishments have gone unnoticed. There’s a lot more to do, like maneuver a private equity take-over, but there’s plenty to be proud of. 25 years ago, renewable energy wasn’t taken seriously. Today, it powers nearly 60% of New Mexico and prices are nation-leading anyways. The oil and gas industry may have made NM an energy state, but New Mexico will be an energy state long after oil and gas.

New Mexico was slow to recover from the 2008 financial crisis. A poor government response led to painful job losses and a stagnant population. And people left rural New Mexico in search of opportunities in cities and the Permian basin. Economists call this period after 2008 the ‘lost decade’. Then before the pandemic hit, the economy started to show life again. With the rise of the oil and gas industry, population growth inched upward again, economic growth returned, and fossil fuel revenues started pouring in. While many New Mexicans are still poor, in the 6 or 7 years since the lost decade ended, the State of New Mexico became very rich.

The oil and gas boom of the last few years is unlike anything the state has experienced before. It poses some serious threats, but also many opportunities for the state’s economy. The revenue brings with it the risk of dependence on a single boom and bust industry (that’s to blame for the changing climate). But on the other hand, the state’s growing piggy bank could help diversify the economy towards a more sustainable and fruitful future.

The piggy bank I’m referring to is New Mexico’s Sovereign Wealth Fund (SWF). The fund has historically invested its portfolio out of state, but as of recently, its investing billions of dollars in the local economy - aiming to boost target industries like quantum and advanced energy. The energy transition is playing a cornerstone role in transitioning the state economy away from oil and gas, but I’ll leave that topic for a later post. For now, I’ll focus on New Mexico’s rapidly growing Sovereign Wealth Fund and the new domestic investments that make it unique in the US.

The Oil and Gas Revenue Boom

Despite the high poverty numbers, New Mexico is a very rich state. The unprecedented rise in fossil fuel production in the Permian basin has, quite literally, led to more state revenues than we know what to do with.

60% of the growth in New Mexico’s economic activity (MTGR) since 2020 has come from oil and gas extraction. The state generates revenues from this extraction in multiple ways: gross receipts taxes (sales taxes), severance taxes, State Land Office leasing, Federal Mineral leasing, and personal income taxes. This revenue goes either directly into the state’s General Fund or into one of the Permanent Funds in the SWF.

The state’s General Fund, the bucket of money that finances regular government operations, has become increasingly dependent on the oil and gas industry. Through taxes and leasing fees, the industry now provides nearly 40% of New Mexico’s general fund revenue. And when counting interest income from permanent funds, the dependence is closer to 50%.

To be fair, New Mexico isn’t as dependent on oil as Alaska, which regularly receives up to 90% of their general fund revenue from the oil industry. Nevertheless, that’s an unsustainable road New Mexico doesn’t want to go down.

Oil and gas has provided big revenues to the state, but it also poses climate and financial risks. Climate change may be less of a political issue today, but it’s threats still loom. Ideally, some of New Mexico’s oil and gas will stay in the ground. Even if every last drop of oil was extracted, New Mexico will have to figure out what to do next - Alaska’s oil boom of the 90’s eventually slowed down, and that’s certainly in New Mexico’s future as well.

The state legislature has been aware of these risks, and have therefore redirected more and more oil and gas revenues to permanent funds housed at the State Investment Council (SIC), otherwise known as New Mexico’s SWF.

What is a Sovereign Wealth Fund?

SWFs are basically investment accounts owned by a government. Typically they’re owned by countries or states that run a trade surplus - usually thanks to oil exports. These governments aim to capitalize on the trade surplus by saving money either for a rainy day or some other economic opportunity.

The largest, most well-known, SWFs in the world are in countries like Abu Dhabi, Singapore, Norway, China, and Saudi Arabia - each with funds in excess of a trillion dollars. All of these countries run a trade surplus, and many of them use their funds to, among other things, relieve tax burdens on their citizens, provide private investment efficiency, and stabilize foreign exchange earnings.

You’ll notice that the US is not in this list despite being regarded as the richest country on the planet - and that’s because the US doesn’t really need a SWF. The US doesn’t run a trade surplus, so how would a SWF be funded? The US has the most advanced private investment ecosystem in the world, and public grants and loans would make any new fund’s investments redundant. And dollar dominance means the Federal government can issue debt in its own currency. President Trump’s fixation on building an American SWF may have more to do with pageantry than economic reasoning.

On the other hand, it makes sense for governments like New Mexico and Alaska to have a SWF because they have a trade surplus, plenty of natural resources to export, a need to stabilize general fund revenue, and need a boosted private investment ecosystem.

New Mexico’s Sovereign Wealth Fund (SWF)

New Mexico’s SWF, wears many hats: it provides the General Fund with interest income, finances water infrastructure projects, invests in free childcare and college for all New Mexicans (the only state to do this BTW), and more.

As of January 2025, New Mexico’s SWF had nearly $60B in assets under management - making it the second largest in the nation. Since the beginning of the year, the fund has already grown to nearly $66B. Analysts project that it will surpass Alaska’s SWF to become the largest in the nation by 2030 - reaching $100B or more. The incredible pace in which fossil fuel money is entering state coffers is highlighted by the fact that revenue is coming in faster than the SIC can invest it. Top 1000 Funds reported last year:

The SIC is expecting $5 billion in inflows this year following $8 billion in both 2023 and 2022, and is currently around 10 per cent overweight cash and bonds relative to target.

“We are seeing massive capital coming into our funds,” says [New Mexico SIC Chief Investment Officer] Smith in an interview... “our large cash allocation is due to the large inflows, not by strategic choice.”

As charted below, the SIC expects the boom to continue.

Rystad Energy analysts, and the Legislative Finance Committee (LFC), expect oil and gas production to peak in the 2030s. The SIC, as shown above, seems to project the same, though their forecast looks rather conservative based on current trends.

Investment decisions are made by a professional staff of analysts and the council-appointed State Investment Officer, while the policies and strategies are guided by the SIC’s 11 council commissioners: the Governor (who is always the Chair), State Treasurer, State Land Commissioner, DFA Secretary, a higher ed CFO, four public members appointed by the Legislative Council, and two public members appointed by the Governor. The SIC’s portfolio currently consists of 34% public equities, 20% fixed income, 8.6% private equity, 8% cash, and so on down the list of asset classes.

Many SWFs around the world, including New Mexico’s, historically, invest their dollars primarily outside their state or country. NM SIC doesn’t explicitly publish their share of assets that reside in New Mexico, but as of 2017, their accumulated New Mexican assets totaled about $319M since the creation of the SWF in the 1950s.

Recent changes to the way the SIC invests aims to increase local investments dramatically, with big local investments being made over the last year and a half. As Buyouts Insider writes:

…that [in-state private equity] platform, which is meant to help bolster New Mexico’s economy, is being reshaped with some changes to which funds qualify for that program and more of an emphasis on venture capital…

New Mexico Economic Development Secretary talks about this turning point quite a bit. On the Bob Clarke podcast a few days ago he noted:

[The SIC has] taken about two billion dollars, a billion in the the last four months, and moved it into funds that are the best, highest performing deep tech venture funds in the world… things around advanced computing, advanced energy, space, defense, all areas that align with our economic development strategy, things that New Mexico has a right to win because of the history and our workforce, our research labs, and our research universities.

An additional $2B of local investment marks a stark difference to the $319M total local portfolio in 2017. Other large SWFs around the world deploy their capital in similar ways. Saudi Arabia and UAE grew rapidly in part due to their domestic SWF investment strategies. New Mexico is now the only US state using their SWF to spur local growth in this sort of aggressive manner.

During the Governor’s Economic Development Conference last month, many out-of-state site selectors pinpointed the drivers that entrepreneurs consider when coming to New Mexico. They look for competitive incentives, good infrastructure, sites ready to build on, a compatible workforce, and a healthy VC ecosystem. I argue New Mexico has all of these attributes but the VC ecosystem, which is obviously changing.

A healthy VC ecosystem is important for providing access to capital and follow-on funding for startups, signaling investor confidence, attracting and retaining talent, fostering innovation spillovers, and complementing public incentives - which is why this recent change in the SWFs investing strategy could be a turning point.

Is it going to work?

While it’s still early days, NM Angels reports that we’ve already seen some positive results including high growth in startup capital investment and venture deals. Just last month the SIC committed $25M to a quantum venture studio in downtown Albuquerque, complementing the local tech workforce and training programs. Pacific Fusion, a leading nuclear fusion company, announced a $1B facility in Albuquerque, also partly backed by SIC partner funds.

Population growth remains the clearest indicator of whether new state policies are translating into real economic opportunity. Demographic and economic trends move together - when economic opportunities arise, people show up or stay put. Without opportunities, people leave. Population stagnation during the lost decade gave way to slow growth over the last few years, but can the state match growth rates seen in Arizona, Colorado, or Texas? If the SIC can help differentiate New Mexico as a great place to live and work, I don’t see why not.

I’d like to see investment in transportation infrastructure - perhaps an expansion of the Rail Runner - along with affordable housing, which is often cited as another top factor holding Albuquerque’s economic development back. The SIC could also explore partnerships with utilities to accelerate grid-scale battery deployment or geothermal assets. There are plenty of projects that would offer the returns the SIC is mandated to pursue while building an economy New Mexicans, and others, want to be a part of.

The lost decade scarred many New Mexicans. We’ve been hearing that New Mexico has ‘potential’ for so long that it’s become a curse word. It’s felt like no matter what we do, we’re always on the wrong end of the rankings - last in education and first in poverty. But one positive ranking is that New Mexico will soon have the number one largest wealth fund in the nation. ‘Potential’ isn’t a curse word when it’s paired with the right opportunity. New Mexico is rich now, which feels like an opportunity to me.

New Mexico’s “Lost Decade” starts at the 2008 Great Recession and ends, economists say, somewhere around 2019. It’s highlighted by stagnant population growth, rural flight, lost jobs, and an economic landscape in flux. Some regions fell out of prominence while others rose from the desert, and in the end, I argue, New Mexico has been left with scars, but also an opportunity.

I plan for this to be a two-part series. First, we’ll go over New Mexico’s lost decade. And in a later post I’ll write about New Mexico’s opportunity to turn the page on the lost decade and become an economic development powerhouse. So for now, let’s go back in time to the start of the lost decade - back to 2008.

The Shock

The 2008 financial crisis, also known as the global financial crisis (GFC), exacerbated the Great Recession. I’m going to use these terms interchangeably throughout this post to describe the time in which New Mexico’s lost decade started. The cause of the crisis included excessive speculation on property values, which led to a pile of defaulted mortgages, a liquidity crisis, the collapse of Lehman Brothers, bank runs, and a stock market crash. Unemployment spiked around the country, and while New Mexico has always had high poverty rates, it was exacerbated for about a decade.

Poverty rate in New Mexico from 2000 to 2023

The crisis hit New Mexico especially hard, for reasons I’ll explain soon, and population growth slowed. Even as the rest of the West kept growing, a lack of opportunity kept the Land of Enchantment at a crawl.

While overall population growth was basically stagnant, within-state movement since shows people leaving rural areas, opting to live in cities, suburban areas, or the Permian Basin in Southeastern NM - which is the most productive oil and gas basin in the highest-producing country in the world.

NM County Population Change 2008-2023

Changes in employment from 2008 to 2024 mirror, and perhaps explain, these within-state migration trends. Eddy and Lea counties, home of the New Mexican side of the Permian Basin, are two of the 11 counties that have seen positive employment growth since the GFC.

There are many theories on why the financial crisis kicked off the lost decade in New Mexico, but the most believable theory goes something like this. Once the recession hit, large companies consolidated their workforce to larger urban clusters outside of the state. Intel, a company that in 2009 supposedly made up over 10% of New Mexico’s manufacturing employment, shed nearly half of its workforce in the state. Other top employers like Caterpillar completely left. Home-grown companies also tightened their belts with lay-offs. Anecdotally, it was during this time that my dad was laid off from the hotel he managed. There were ripple effects throughout the economy, and employment didn’t recover until roughly 2019, which is why I think this is about when the lost-decade ended.

One could argue that the lost decade lasted through the Covid pandemic, but recovery from that was a bit quicker thanks to government stimulus and a New Mexican economy that was more resilient than it was in the decade prior.

Economic development and entrepreneurship also lagged during the lost decade. There were at least 6 years of entrepreneurial decline following the housing bubble crash, which has since bounced back.

As the story goes, New Mexico’s response to the financial crisis was subpar. While other states expanded their economic development incentive programs following the GFC, New Mexico did the opposite and cut down or eliminated their most successful incentives. The economic development world is highly competitive, and attracting large employers takes big incentives, an educated workforce, infrastructure-ready building sites, healthy venture capital ecosystems, etc. - and New Mexico couldn’t compete for jobs as the rest of the nation recovered from the recession.

Of course, there is likely more to the story. New Mexico’s lost decade can’t completely be explained by a few companies leaving and a poor government response. I’m sure other factors were at play - like deeply-engrained poverty, poor education, a general unawareness of New Mexico compared to the rest of the West, etc. - but it’s a decent explanation.

The Divergence

As New Mexico saw rural populations decline, similar to the rest of the nation, the economic landscape started to shift as well. Many unemployed people and new graduates started leaving the state, as depicted above, but those still here had to figure out what to do for work. My dad, for example, managed a hotel in California for a while after being laid off from his local job. Others found work in the oil fields, government, the national labs, etc.

Gross receipts data collected by the NM Tax and Revenue Department help tell the economic story since the recession hit. Matched Taxable Gross Receipts (MTGR), basically the total amount of money businesses report from taxable sales of goods and services, are reported at the county level. This economic activity shows which industries were likely hiring during the lost decade.

I indexed this data to show relative growth over time by county. The following graph illustrates the dip in economic activity the state experienced during the recession, then it shows the Permian basin counties start to separate themselves in terms of growth.

From 2008 to 2019, most of the counties’ MTGR saw only mild growth, outside of the Permian and some metro areas. The divergence between the Permian basin and the rest of the state becomes quite stark over the lost decade, where it seems like we have two very different economies. In absolute terms you can see the insane growth of Lea and Eddy counties in the following video, especially in the past couple years.

There are a plenty of story lines to follow above, so I’ll highlight a few. First, it’s quite obvious how dominant Albuquerque and Bernalillo County have been economically for the state. This isn’t too surprising given 1/3rd of the state’s population lives in Bernalillo County. The big county’s largest industry over the past few decades has been retail trade, making up 23% of activity today. The fastest growing industry over the past five years has been arts, entertainment, and recreation.

The next storyline I’ll point out is San Juan County’s. Through the 2000s, San Juan was the second-most active economic hub in the state, with the largest industry being oil and gas extraction. Since the recession, San Juan County’s largest industry has been retail trade. Depleting oil and gas resources, aging wells, and a shift in the economics favoring shale plays (like the Permian) tell part of the story of San Juan’s decline. Over the last five years, the fastest growing industry has been public administration.

Eddy and Lea counties basically follow equivalent storylines to each other. Their meteoric rise to the number two and three spots among top MTGR counties is driven by oil and gas. Oil and gas make up 36% and 37% of Lea and Eddy counties MTGR, respectively, and that industry has unsurprisingly been the fastest growing, making up 58% and 59% of growth in the last five years. These two counties combined are 1/5th the population of Bernalillo County, but have surpassed Bernalillo in MTGR.

Turning a new leaf

I think many people would disagree with me when I say the lost decade is over, but that’s only fair. There’s still a lingering feeling that New Mexico will be stuck in stagnation. But since Covid, there are actually plenty of counties that are starting to grow. Torrance County is making a comeback with large growth in the construction industry recently. Dona Ana, Otero, Sandoval, Curry, and Valencia Counties are also seeing consistent growth, and the State government is richer than it’s ever been. New Mexico has had the fastest growing household income since 2020 out of all states, and also has the been gaining manufacturing jobs quicker than most states.

The Governor may tell you that her policies have helped turn a new leaf in the state - and she may be right. New Mexico has been attracting manufacturing and tech jobs again, and state and local politicians have certainly helped make that happen. And there’s no question that oil and gas has helped fund it.

While the lost decade has ended, we still need to reconcile with the awkward divergence between the Permian counties and the rest of the state that evolved over the lost decade. New Mexico is a majority blue, liberal, state that believes climate change needs to be reckoned with, but the climate-changing fossil fuel industry has filled state coffers in recent years giving us exciting opportunities - such as funding free college and universal childcare.

On one hand, we’ve got an industry that could help fund our comeback story, and on the other we have a desire to live in a mild-weathered, beautiful state saved from pollution and climate change. For New Mexico to continue to be a habitable and comfortable place to live, some of that oil is going to have to stay in the ground.

In my next post I’ll write about the New Mexico government’s increased dependence on the oil and gas industry, and the unprecedented wealth the state is hoarding in our Sovereign Wealth Fund. New Mexico may never lose its scars from the lost decade, but I’d say there’s good reason to have hope.

New Mexico’s newest, largest AI data center project, Project Jupiter, in Santa Teresa, NM, is dominating New Mexican energy and economic development news. The $140 Billion industrial revenue bond (IRB), possibly the biggest IRB to ever hit the U.S. market, is setting the tone for next-level energy demand that’s to be expected moving forward.

The project will ultimately require a gigawatt of electricity to operate - which is objectively loco. For context, that’s roughly 25% of New Mexico’s current electricity generation capacity today.

When you start to think about the increased energy demand that not only these data centers will prompt, but the electrification of everything from transportation to household appliances to industrial processes, the underwhelming status of our current grid capabilities come into perspective. On top of this, the Federal Government is waging war on the cheapest forms of energy on the market, making local, state, and regional action paramount to fighting both climate change and higher electricity costs.

Oracle and Open AI, the companies behind Project Jupiter and the Stargate initiative, are going to build their own on-site micro-grid and electricity generation - which will apparently be gas-powered first and solar-powered later - but local constituents are understandably worried about the legitimacy of these claims. Legally, Project Jupiter can build any type of electricity generation that they please as long as they follow the rules within the Energy Transition Act.

New Mexico, in 2019, passed the Energy Transition Act (ETA), which directs electric utilities to reach 100% renewable energy by 2045. The state is currently generating around 50% of its electricity from renewable sources, but as data centers, EV chargers, and other new technologies drive electricity prices up across the country, sub-national governments (because the Federal Government is currently… erm… distracted) need to be preparing for an unprecedented demand increase on their own. Electricity prices have been increasing at an increasing rate since covid, and economists expect this to accelerate further.

We should be thinking about economic and environmental policy that welcomes AI investment into communities that want to attract jobs and capital investment without blowing up electricity prices or throwing away climate goals.

Many states like New Mexico have Renewable Portfolio Standards (RPS), which mandate electric utilities to reach net zero by mid-century, but another scheme that works hand-in-hand with an RPS is liberalized electricity markets. While the RPS offers long-term direction, markets can spur short- and medium-term incentives. Many decarbonizing regions around the world have mature, competitive electricity markets that drive price savings and energy decarbonization, including some regions in the US and Europe, operate more independently than the rest of the nation:

While some utilities like PNM in Central New Mexico are starting to participate in the California ISO (CAISO) day-ahead market, there’s an opportunity to create a more integrated, liberalized market in the West called the Western RTO.

Liberalized markets create an environment where electricity generators win by having the cheapest electricity - creating competition that ultimately benefits consumers. I wrote a post earlier this summer that explains the economics of electricity markets and how MAGA is getting an F in economics. Here’s a link:

In summary, our electric grids in the West (outside of California) currently operate with regulated monopolies owning most of the power generation and some outside companies generating energy through power purchase agreements (PPAs). When one entity owns most of the generation supply, even when regulated by the government, incentives to decarbonize are only dictated by law.

In contrast, a competitive electricity market aligns incentives for environmentalists and consumers through the basic laws of economics. In California, hundreds of electricity generators compete hourly in an auction in hopes to get their electricity sent into the grid. Renewable electricity offers basically-free energy for several hours a day, which undercuts more expensive, price-setting fossil fuels. Any difference between the cost of renewables and the cost of the most expensive electricity purchased in that hour’s auction becomes profit for renewable generators.

So, in a liberalized market, as long as the market stays adequately competitive, renewables and grid-scale batteries offer investors profits and incentives that continuously drive prices and emissions down. This is why something like the Western RTO could be a powerful tool to deal with increasing electricity demand, higher prices, and climate change.

The Western RTO is a proposed regional electricity market that would at least include Arizona, California, Colorado, Nevada, and New Mexico, with potential to add Washington, Oregon, Montana, Idaho, Wyoming, and Utah. An RTO would be responsible for organizing energy day-ahead and spot markets, transmission planning, and more. There are plenty of benefits for each of the states involved besides lower electricity prices and emissions. Participants in the market broaden the energy resources available to all of them - making the grid more efficient and reliable - especially during extreme weather events.

The National Caucus of Environmental Legislators notes that “Colorado and Nevada have both adopted legislation to require transmission organizations to join RTO’s by 2030… Other RTO’s like Southwest Power Pool (SPP) and CAISO are looking to expand into the Western states, creating an opportunity for Western states to join an already formed RTO.” As you can imagine, it’s difficult to get 11 different states with varying politics to get on the same page about anything, but each additional state that passes legislation like Colorado and Nevada means the RTO can come closer to realization and be more effective.

Pairing organized electricity markets with an economy-wide renewable portfolio standard offers a near bullet-proof electricity and climate plan. While the market ensures short- and medium-term incentives for clean energy investors, the RPS locks in long-term direction for energy markets.

Western U.S. states should be thinking about how they’re going to fight climate change and high electricity prices without the help of the Federal Government. As I noted when Trump was elected for his second term, climate policies are going to be left up to the states, and the most politically feasible solutions should be considered.

Volatile energy policy at the national level will result in two very different types of American states: those that “believe” in renewables and science, and those that believe Trump’s politicized story of energy and hold onto aging coal and gas power plants. AI data centers, electric vehicles, and the technologies of tomorrow are going to demand more and more electricity. Increased electricity demand will test our grids, but regions that utilize the laws of economics will win.

Over the past few weeks I’ve been setting the foundation for my recently finished master’s thesis. First, I explained how the economics of electricity markets work, and why renewables will eventually win. Then, I explained a model we built showing how the UK is overcoming renewable intermittency using transmission lines to regions with different renewable energy capabilities. Today, I’m going to share some of the main results from my group’s thesis project, which builds upon my last two posts, though reading the previous two posts is not entirely necessary.

Our thesis evaluates the role of cross-border interconnection in Great Britain’s electricity market. Using both reduced-form regressions and a detailed structural model of the British electricity grid, we quantify the impact of interconnector capacity on wholesale electricity prices, consumer surplus, and domestic and imported emissions.

I’m proud to share that our thesis group, consisting of myself, Euan Gilchrist, Charles Nicholson, and Andrew Wells, received a top-of-class grade with a 10/10. To see all of our results, feel free to read the entire paper, which is attached at the bottom of this post.

Motivation and research question

First of all, why did we focus on Great Britain?

Euan and Charlie are both from Britain, and Andrew worked in the British energy market before - but that’s not entirely why we’re interested in British energy. We decided to focus our thesis on GB because it offers a terrific setting to study interconnectors, batteries, and grid decarbonization. Britain’s liberalized electricity grid is compelling because it’s physically isolated from continental Europe - highlighting the importance of interconnectors and batteries for balancing supply and demand.

Also, Britain has steep climate goals. The UK aims to be net zero by 2050, following the Paris Agreement, and their electricity grid is set to reach net zero far before that. They’ve made great strides in grid decarbonization in recent decades thanks to their aggressive investment in domestic renewables, interconnectors, and battery storage. Their rapid deployment of these technologies helped them completely remove coal from their domestic electricity generation, a feat few countries have achieved.

Much of this achievement is due to their increasing investment in renewable energy, such as on- and off-shore wind, and their leading deployment of grid-scale battery storage.

And Great Britain has been building more and more interconnectors with European countries. They’ve nearly quadrupled their interconnector capacity since 2010, giving them a total of 10.3 GW of import/export capacity:

While interconnecting grids is great, we realize that who you connect with is equally or more important. Each of Britain’s connected countries has a different grid-mix, and therefore send Britain electricity with differing prices and emission levels. France is very nuclear-heavy; Denmark sends a lot of wind-generated power; and Norway sends mostly hydro:

Each of these country’s grid-mixes reflects their geographic niches and political acceptance of varying technologies. And each of these technologies comes with varying degrees of intermittency - Denmark’s wind is cheap but isn’t always available; France’s nuclear isn’t as cheap as wind, but serves as an always-on baseload; Norway’s hydro is cheap and the non-pumped-storage hydro is always on; and so on... This diversified group of trading partners gives Britain access to cheap electricity that complements their own grid.

Britain has historically had higher wholesale electricity prices than each of the countries it is interconnected with besides Ireland. As a result, Britain is generally a net importer from mainland Europe and a net exporter to Ireland. These trends are summarized in Table 2:

We wanted to test the effect of each of these interconnections on the UK grid, and see if other investments, like batteries, would have been better for prices. More specifically, our research question is:

What is the impact of Great Britain's interconnector investment, and would alternative investments offer greater returns to society?

To answer this question, we took methodological inspiration from a paper our professor, Dr. Mar Reguant, co-authored: The Dynamic Impact of Market Integration: Evidence from Renewable Energy Expansion in Chile (Gonzales et al., 2022). Gonzales et al. analyze the addition of a transmission line connecting renewable assets in the Chilean Atacama Desert to the demand centers such as Santiago further south. They use a combination of reduced-form and structural models to measure the effects, basically because the two approaches complement each other - making up for each others limitations.

We apply Gonzales et al.’s regression approach to Britain’s six interconnected partners, and expand on it by using interconnector outages to add variation to our independent variables of interest. Given some of the limitations of this regression approach, the second part of our paper takes a structural approach (a sort of toy version of the UK grid and its interconnectors built using the coding language Python). Counterfactual analysis of a structural model allows us to validate results from our reduced-form model, as well as explore impacts on consumer welfare and emissions.

Finally, we extend our structural model to include investment, closely following Reguant’s approach used to model the Californian grid (2019). In addition to the investment mix considered by Reguant, we also consider the potential for additional investment in batteries. This allows us to assess the findings of Biancardi et al. (2024) in a British context; that is, whether batteries can be an effective alternative to interconnectors in alleviating renewable intermittency.

Reduced form methodology and results

Our reduced-form models regress British wholesale electricity prices on a range of controls and, our variables of interest, British interconnector capacity with each country. (Gonzales et al., 2022) adopt an event-study approach; prices are regressed on a dummy variable that identifies the date of connection. We advance this approach by replacing this dummy variable with a variable that captures hourly variation in interconnector capacity (accounting for, for example, outages).

As shown in Figure 2 below, the outputs from the reduced-form model suggest that Britain’s interconnectors tend to have had a statistically significant negative impact on British prices. The direction and magnitude of these effects align with previous estimates on the price impact of British interconnection by MacIver et al. (2021) and Zakeri et al., (2018).

On a country-by-country basis, our reduced-form findings are as follows:

• Interconnectors with France are found to have the largest effect on average prices, decreasing prices by between 5% – 8.1%. This is unsurprising given the relative size of the French interconnectors, and it being a net importer. This effect is somewhat smaller when normalized to a per-GW effect; prices decrease by between 1.2% – 2%.

• The Belgium interconnector is found to have the largest normalized per-GW impact, decreasing average prices by between 4.3% – 7.2%. As this is a 1 GW interconnector, the total and normalized effects are equivalent. The relatively large normalized effect relative to France is somewhat surprising given these two countries’ grids are highly integrated.

• The interconnectors with Norway (0.9% – 4.5%) and Denmark (1.3% – 4.8%) are found to have similar, negative, effects on average prices. The direction of these effects aligns with Britain being a net importer from these countries. However, given the larger price difference and higher imports from Norway, the similar scale of effect is surprising. Normalized price effects imply a 0.9% – 4.5% and 0.6% – 3.2% decrease in average prices for Denmark and Norway, respectively.

• The only interconnector found to increase average prices is the Netherlands (1.2% – 3.5%). This result appears inconsistent with Britain’s position as a net importer from the Netherlands. As this is a 1 GW interconnector, the total and normalized effects are equivalent.

• The Ireland interconnectors have no statistically significant impact on British prices (-1.1% –0.9%). The upper end of this estimate appears consistent with the small level of net exports, the typically small difference in prices and the relatively small size of these interconnectors.

We also ran an alternative regression which allows us to understand how the impact of capacity on prices evolves at different hours of the day. This model is equivalent to the previous model, aside from the introduction of an interaction term which captures interactions between each interconnector and the hours of the day. This allows us to understand whether the average effects in the baseline model hide any variation across the day.

This alternative version of the reduced-form model shows that interconnector price impacts are heterogeneous across the day. Figure 3 presents these effects by hour, illustrating that different interconnections are somewhat specialized to serve different groupings of demand.

On a country-by-country basis, our alternative reduced-form findings are as follows:

• The French interconnectors generate negative price effects across most hours of the day, these effects are strongest in the morning peak where average prices are decreased by up to 4.8%.

• The Netherlands interconnector generates large positive price effects during the night and some smaller positive price effects during the day.

• The Belgium interconnector shows strong negative effects during all periods except peak hours. Effects are strongest during the night where average prices are consistently reduced by over 10%.

• Both the Norway and Denmark interconnectors are associated with consistent negative price effects during daytime hours. The Norway interconnector also shows some smaller negative effects of up to 3.5% during the evening peak.

• For the Irish interconnections, only a single hour shows a statistically significant price effect (10am).

There are several limitations of the reduced-form approach that we address with the structural model, including how the regression approach only assesses the impact of new interconnections against the prevailing energy market conditions. This is problematic because we are comparing across several interconnections introduced across a time-period that encompasses the energy market crisis of 2022-23 caused by Russia’s invasion of Ukraine. Also, this approach ignores how interconnection dynamically impacts incentives to investment in different technologies.

Despite these limitations, we find our reduced-form results to complement our structural model, and the two models give similar results. As mentioned before, we took note of the approach used by Gonzales et al. to address the limitations of a regression based analysis by building a structural model.

Structural model method and results

The beauty of the structural model is it allows us to test counterfactuals in a way not possible with a regression. This model allows us to run a series of counterfactual simulations in which interconnections with each country are disabled one at a time. We then compare electricity prices, consumer welfare, and domestic and imported CO2 emissions in each counterfactual scenario. In other words, we are able to “turn off” each of the interconnectors, one at a time, and measure the effect of its absence on the British grid.

We adopt a social planner framework to simulate the British wholesale electricity market under these varying interconnection counterfactuals. We instruct the social planner in our model to maximize aggregate net surplus, defined as gross consumer surplus minus generation costs, battery degradation costs, and the cost of net imports. This approach abstracts from market power or strategic bidding behavior and instead focuses on what a welfare-maximizing central planner would choose under perfect foresight and zero market frictions.

For you nerds out there, this model is implemented in Pyomo using the mixed-integer programming (MIP) solver Gurobi. Translation for everyone else: we used a computer tool that finds the best solution in a very complex problem. Our model thus represents the British electricity grid at an hourly resolution for 2024, capturing dynamics across different points in time.

We fed our model the following information:

• hourly demand for all of 2024 in Britain;

• hourly electricity prices for all of 2024 for Britain and each of the interconnected countries;

• the types and amounts of energy generation present in Britain in 2024 constrained by installed capacity and capacity factors;

• the average UK carbon price for 2024 (UK ETS);

• import elasticities for each interconnected country (estimated using the same technique used by Reguant (2019));

• constraints on battery charge/discharge and degradation; and

• the import/export capacity of each of the interconnected countries

We then let Gurobi take the wheel and utilize existing generation types, charge and discharge batteries, and trade with interconnected countries - all with the goal of reducing prices in Britain for each hour of the year. We then compare electricity prices, consumer welfare, and domestic and imported CO2 emissions in each counterfactual scenario to those in the baseline model, where all interconnectors are fully operating.

Figure 4 below presents absolute and normalized changes in British wholesale prices and consumer surplus when each interconnector is disabled, relative to our baseline model.

For all countries aside from Ireland, disabling interconnectors results in higher British wholesale prices and therefore lower consumer surplus. This is consistent with Britain being a net importer of less expensive electricity from European countries, and a net exporter to higher-priced Ireland.

On a country-by-country basis, our structural model findings are as follows:

• Disabling France’s interconnectors has the largest absolute impact on prices, increasing them by 7.1%. When normalized by its 4 GW interconnector capacity, the impact reduces to 1.8%.

• Norway has the largest normalized price impact, at 2.5%, reflecting its role as a low-cost supplier of hydroelectric power. Despite its smaller interconnector capacity compared to France (1.4 GW), the absolute price increase is significant at 3.6%.

• Belgium’s interconnector also exerts a notable influence on prices, with both the absolute and normalized effects equal to 1.9%. This again aligns with the contribution of nuclear generation to its export supply.

• Denmark and the Netherlands exhibit smaller impacts on British prices — 1.2% (absolute) and 0.8% (normalized) for Denmark, and 0.8% (absolute and normalized) for the Netherlands. This suggests more modest price differentials or more limited arbitrage opportunities under normal trading conditions.

• Ireland is the only country where disabling its interconnectors reduces British prices — by 1.1% in both absolute and normalized terms. This is consistent with Britain typically being a net exporter to Ireland, therefore disabling this link reduces export-driven price increases.

Figure 5 presents the absolute and normalized impacts of interconnector disablings on domestic emissions.

The results suggest a clear pattern:

• Disabling interconnection with France causes the largest increase in domestic emissions, with a 30.2% absolute rise, and a 7.6% increase when normalized. This reflects displacement of low-carbon French nuclear imports with higher-emissions British gas generation.

• Norway’s disconnection leads to the second-largest increase, with 10.1% absolute and 7.2% normalized rises in domestic emissions.

• Denmark follows, with a 7.6% absolute and 5.4% normalized increase in domestic emissions.

• Disabling the Belgium interconnector raises domestic emissions by 5.6%, both in absolute and normalized terms.

• For the Netherlands, domestic emissions rise but slightly more modestly — by 4.0%, again equal in absolute and normalized terms.

• Ireland is the only interconnector for which domestic emissions fall, by 1.5% in both absolute and normalized terms. This likely reflects Britain exporting less electricity to Ireland, thereby running fewer gas-fueled plants domestically.

Figure 6 presents the absolute and normalized changes to imported and exported emissions following interconnector disablings. Disabling any interconnector reduces imported emissions, as Britain no longer receives electricity — and associated emissions — from the partner country.

Norway stands out as an exception: while imported emissions fall materially for all other countries, they only decrease marginally when the Norwegian interconnector is disabled. Denmark shows the largest reduction in imported emissions (32.2% absolute, 23.0% normalized), consistent with substantial volumes of carbon-intensive imports being displaced.

The arbitrage model

We noticed in our results that Britain and its trading partners don’t always trade in the direction that you would expect. Sometimes, even when prices were higher in Britain, Britain would export electricity to countries with lower prices. To better understand this, we implemented an alternative arbitrage model that removes the trading frictions observed in the historical data and assumes perfectly efficient cross-border trade.

This model ties interconnected flows directly to price differentials between Britain and the trading partner - if prices are higher in Britain, the model imports electricity until capacity is reached, and vice versa. This isolates how much of the baseline results stem from market inefficiencies like transmission congestion, contractual flows, or Brexit-related trading barriers.

Under the arbitrage specification, we found that across the majority of countries, the arbitrage-based model produces larger price increases when an interconnector is disabled. This suggests that in a more efficient market, Britain could increase consumer welfare by more heavily importing electricity to stabilize its prices, particularly from countries like France, Denmark, and Belgium. Notably, the price impact of losing access to French imports nearly doubles under the arbitrage assumption.

These results support the idea that price impacts are greater when interconnectors are traded via price arbitrage than under the more constrained conditions observed in reality - revealing the presence of trading inefficiencies in real-world cross-border electricity markets.

Investment model method and results

The investment model is an extension of the structural model to include endogenous investment in select technologies. The model thus chooses not only dispatch quantities and interconnector flows, but also is allowed to invest in domestic generation at will - still in an effort to reduce prices in Britain. These investable technologies include wind (on- and off-shore), solar, gas, and battery storage (2-hour duration).

Capital costs are represented with both linear and quadratic cost terms, the latter discouraging overbuilding and implicitly capturing siting constraints, system balancing costs, or policy preferences. Capital costs are annualized per MW and derived from DESNEZ and NREL using assumptions in line with industry standards. Any new capacity built by the model expands the available upper bounds for generation, charging/discharging power, and energy storage, and the rest of the model runs the same way as the non-arbitrage model, including the turn-one-off scenarios.

This analysis speaks directly to the second component of our hypothesis: that interconnectors and batteries may be substitutes in delivering grid flexibility, especially for a net importer like Britain.

In all cases, including the baseline scenario and every counterfactual, our model prefers to invest in battery storage capacity rather than any other technology. This finding is consistent across all capital cost assumption and model specifications. Because the social planner prefers batteries in every case, in effect, when comparing counterfactual outcomes to the baseline investment model, we are thus assessing the change in battery capacity required to compensate for the removal of each interconnection.

Figure 9 below presents the changes in battery capacity investment when each interconnection is disabled.

The results of the investment model follow a clear pattern:

• For countries from which Britain is a net importer — including Belgium, France, the Netherlands, Norway, and Denmark — disabling interconnection increases battery investment. This indicates that, under net import conditions, interconnectors and batteries function as substitutes in delivering system flexibility.

• The strongest substitution effect arises with France: when the 4 GW French interconnection is disabled, the social planner adds an additional 11 GW of battery power capacity above the 2.1 GW in the baseline scenario. Even when normalized, this remains the largest observed response, with 2.8 MW of battery investment per MW of interconnection lost. While this figure may appear disproportionate, it reflects the fact that this country’s interconnectors provide flows that are persistent across the majority of hours. To replicate this, the model builds sufficient battery capacity to store and discharge the equivalent of several hours of lost French imports.

• For the country to which Britain is a net exporter (Ireland), battery investment is decreased in response to the disconnection. This suggests that, when net exporting, interconnectors and batteries act as complements — a finding consistent with the idea that export opportunities increase the marginal value of storage.

Given the uncertainty around battery capital costs and performance, we have sensitivity tested our results. In particular, we consider two sensitivities: (i) a “low battery cost model”; and (ii) the “high battery cost model.” In both cases, our qualitative results are unchanged: interconnectors and batteries appear to be substitutes when Britain is a net importer and complements when it is a net exporter.

The big take-aways

First, our results highlight the role of interconnection in reducing electricity prices and emissions in Great Britain. Across the reduced-form and structural models, we find strong evidence that interconnectors - particularly those with France, Norway, and Belgium - exert downward pressure on British wholesale prices. In the structural model, disconnecting the French interconnector increases prices by 7.1%, while the Norwegian link results in a 3.6% increase, despite its smaller capacity. When normalized by interconnector size, Norway has the greatest marginal value, reflecting the high value of imported hydroelectricity to Britain.

Crucially, we find the value of interconnection depends more on who Britain connects with than on simply expanding interconnector capacity. Links to low-cost, low-carbon partners provides far greater benefits than those to higher-cost or export-driven partners. This suggests that policy should prioritize high-quality interconnection over broad expansion of interconnection for its own sake.

Interconnectors also contribute to decarbonization, with interconnectors with France having the greatest impact. Disabling the French connection results in a 30.2% rise in domestic emissions. Norway and Denmark follow with sizable emissions increases, reinforcing the environmental value of low-carbon imports from these partners.

Our findings raise important questions around capacity utilization and investment planning. Interconnectors influence how domestic generation - especially gas-fueled generation - is used. When interconnectors are available, they suppress the marginal cost of electricity, displacing domestic generators. This implies that interconnection affects not just operating costs, but also investment incentives for domestic capacity.

Notably, falling battery storage costs offer both a complement and a substitute for interconnector investment. For a net importer like Britain, batteries currently act as substitutes by providing flexibility during import-constrained periods and helping to manage price volatility. Our investment model reinforces this point: across all scenarios the social planner consistently chooses to invest in battery storage over any other technology. This suggests that Britain’s current system challenge is less about expanding generation capacity and more about enhancing flexibility.

As Britain’s grid evolves and potentially transitions into a net-exporter of clean electricity, as per MacIver el al. (2021), batteries may increasingly act as complements to interconnection, enabling smoother export flows, storing surplus renewables, and improving the country’s ability to participate in international markets.

Policy frameworks have not kept pace with this shift in battery importance. Interconnection projects continue to receive strong regulatory support and partner transmission system operators, while battery investments remain largely private and face greater barriers. If batteries and interconnectors are indeed substitutes at the margin, as our results suggest, then current regulatory asymmetries risk misallocating investment and delaying decarbonization. A rebalancing of policy incentives — to more fully support storage alongside interconnection — may therefore be warranted as the system moves toward net zero.

I’d like to thank my really smart co-authors, Euan Gilchrist, Charles Nicholson, and Andrew Wells, for making this paper possible. You can find more detail on our data gathering, literature review, assumptions made, theory, model specifications, etc., in the full paper attached below.

Only connect? Evaluating Interconnector Investment in a Decarbonising Energy System - Anaya, Gilchrist, Nicholson, and Wells (2025)

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I read once that, in theory, it would only take about 1% of the Sahara desert to power the whole world with solar. Obviously that’s ignoring major constraints on transmission and storage, but it’s true that we would only need to harness a tiny fraction of the sun’s beams to power the global economy. The sun in the Saharan desert offers consistent, high irradiance sunlight throughout the entire year - the tricky part is capturing, storing, and transporting that power. Low transmission efficiency and high costs have kept Europe from tapping into Saharan solar energy, but as transmission lines become more efficient and affordable, for the first time, projects like Xlinks are nearing reality, offering potential shifts in climate action.

Xlinks is a £22 billion proposed project in the United Kingdom (UK) that is essentially an extension of the UK grid into southern Morocco, where they hope to build 11.5 gigawatts of solar and onshore wind, along with battery storage, and send it 4,000 kilometers through a transmission line into Southern England:

Besides the massive size of the project, the interesting idea behind it is it could solve a big piece of the renewable intermittency issue for the UK. The wind doesn’t always blow in the North Sea, and we all know the UK gets little sun - but tapping into Saharan solar and wind would offer the UK renewable energy during more hours of the day.

This map shows solar energy potential around the world, and you can see the stark difference between Morocco and the UK:

The project would be a first of its kind, and a signal that grids will start to become more interconnected into the future.

Xlinks is still trying to secure financing for the project - but once built, they say it will provide enough energy to cover 8% of the UK’s energy needs. So, a few colleagues and I built a simplified model to test this claim. We were also interested in how the Xlinks project will change the UK’s emissions trajectories, in absolute terms and relative to the other levers that policymakers have at their disposal.

Specifically, we want to know:

• Does a market exist in the UK for the electricity that Xlinks would generate?

• How would UK emissions change after the project?

• Could the project reduce the carbon tax needed for the UK to reach their emissions targets?

Today’s post is a summarized version of the paper we wrote about our model. I was lucky to work on this with the very talented Natalie Ziklova, Euan Gilchrist, and Kai Kempf, and you can download the full, more academic version of our paper here:

Anaya_Gilchrist_Kempf_Ziklova_XlinksModel_2025

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If you're mainly here for the big-picture takeaways, feel free to skim through the modeling detail and jump to the results below. But if you’re curious about how we built the model and the assumptions we made, read on and download the full paper above. Also, if you’d like an entry-level explanation on how electricity markets work before diving into this post, my post from last week would be a good place to start.

The Model

Background and the UK grid

We built a simplified model of the UK grid, electricity market, and the Xlinks project that allows us to tweak variables and test hypotheses. We did this using the coding language Julia, which I won’t get too much into in this post.

To build our model of the UK grid, we used data on wholesale hourly prices, demand, and generation for our ‘fixed production’ technologies (nuclear, hydro and biomass) provided by Elexon. For UK solar, onshore wind, and offshore wind capacity factors, we used hourly averages produced by the European Commission’s Joint Research Centre. To finalize our model inputs, we incorporated UK government data on marginal costs for each technology.

The Xlinks assets

The price used for the Xlinks-generated electricity in the model is based on the most recent negotiated prices. Xlinks approached the UK government to negotiate a ‘contract for difference’ with a strike price of 70 pounds per megawatt hour, which is represented in our model. Contracts for difference are the UK government’s primary tool for decarbonizing their grid and helps companies like Xlinks de-risk their projects.

We simplified the scope of the project in response to data limitations. We only considered Xlinks’ planned solar assets (7GW) and did not model the planned wind assets (4.5GW) or battery storage (22.5GWh capacity). We included realistic constraints on the solar and transmission technologies including a 13% transmission loss factor to account for efficiency losses in the 4,000km interconnection to the UK, which is standard.

Model & Assumptions

To solve the model, we utilize market clearing functions based on cost minimization, where the lowest marginal cost technologies are utilized first. Solving the model allows for a comparison of price, welfare and emissions levels, and also provides a description of the optimal composition of the UK electricity production mix.

First, we solved the model without the Xlinks project included to see how our ‘do nothing’ scenario looks compared to the real world. Figure 2 shows the similarities between the real-world technology generation mix from 2023/2024 and our model-generated generation mix when minimizing costs. Our modeled share of wind generation is significantly lower than in the actual generation mix, which may be attributed to technological advancements in the efficiency of renewables over the past decade not captured in our model.

We then use our model to determine how UK electricity prices, emissions, and welfare would change if the Xlinks project were built and implemented into the UK grid. First, we consider the current UK energy generation assets (the ‘do-nothing’ scenario) and then incorporate the additional assets provided by the Xlinks project (the ‘intervention’ scenario).

For more on the assumptions and data used in the model, feel free to check out the full paper.

Results

Prices, welfare, and emissions

We find that the overall effect of adding the Xlinks solar to the UK grid to be significant, especially on emission reduction. Relative to the “do-nothing” scenario, the Xlinks project:

• Decreases the price of electricity by 1.2%,

• Increases welfare by 0.05%, and

• Decreases emissions by 4.5%.

In contrast to Xlinks’ ambition to meet 8% of the UK’s energy needs, we estimate that Xlinks would meet 2.5% of energy needs with the solar alone. This 2.5% understates the entire proposed project given we did not model the planned wind and battery assets. With that in mind, Xlinks may actually get close to the stated 8% with all of the assets built.

Figure 3 illustrates the price impact of adding Xlinks solar relative to the ’do nothing’ scenario. At a marginal price of £70/MWh, the only technology with a higher marginal cost is gas. This means supply from Xlinks is unable to compete with any domestic renewable energies, but can replace gas when it’s present in the production mix. Notably, gas only has a higher marginal cost than the Xlinks solar due to the existence of a carbon tax in the UK.

Figure 4 illustrates how Xlinks solar is available for 51% of the representative hours. For these hours where Xlinks supply exists, energy from Xlinks is fully utilized 98% of the time. This illustrates the effectiveness of the Xlinks supply at undercutting gas, which is the UK’s price-setting technology 97.5% of the time.

To assess how sensitive our outcomes are to our assumptions, we conducted sensitivity tests on additional interconnector capacity to the Moroccan solar and varying Xlinks solar prices and carbon taxes. We find, with no surprise, that adding interconnector capacity between the Moroccan solar and the UK grid increases solar delivered to the grid, but the cost of an additional line may not outweigh adding batteries to the project. We also find that lowering the contract for difference strike price from £70 to £40 doesn’t change prices, welfare, or emissions much. And, quite interestingly, we find that increasing the carbon price from £32 to £97 has negligible impacts due to the inelastic nature of electricity demand.

Policy comparison: Xlinks vs. carbon taxes

Now to answer our final research question: What equivalent increase in carbon taxes would be required to achieve the same emissions reductions as Xlinks?

As noted before, we found that the Xlinks project (with just solar) would decrease emissions by 4.5%. To find the required increase in carbon taxes that would do the same, we rerun the model without Xlinks and increase the carbon tax until we see a 4.5% reduction in emissions.

We found that it would take a 64% percent increase in carbon taxes (to £69/MTCO2) to achieve this same reduction in emissions. This increase in carbon prices would result in a 10.5% increase in electricity prices, compared to the 1.2% decrease in prices generated by the introduction of the Xlinks assets.

As established earlier, we find emissions are only weakly sensitive to changes in carbon taxes, meaning that using carbon taxes to achieve a small reduction in emissions is extremely difficult. This is due to gas being both the only emission-generating technology in the model and having the highest marginal cost - it is only used as a technology of last resort.

Therefore, reducing gas supply requires encouraging consumers to consume less energy at hours when gas is in the supply mix. Given that energy lacks short-run substitutes, it would take extremely large increases in prices to generate this change in consumer behavior. Whilst carbon taxes are often viewed as the “first best” policy to tackle emissions, this finding shows that renewable energy abundance is likely to be a far more politically feasible solution to decrease emissions.

Final thoughts and takeaways

As discussed, there are limitations to our model: we model the UK grid as static, taking historic data as representative of the UK grid into the future; and we do not consider wind or battery assets. Despite these limitations, our findings show that the Xlinks project, if implemented, would:

• Reduce emissions (-4.5%) and energy prices (-1.2%).

• Allow for relatively cheap reductions in emissions compared to an increase in carbon taxes.

Economists, including myself, often call for carbon taxes as the first-best policy for decarbonization, but that’s unlikely to happen in today’s political climate. Perhaps the abundance agenda is more attainable.

Unfortunately, it still doesn’t mean the Sahara desert will ever power the entire world, and the UK won’t ever have a literal second sun, but it means Northern Africa could play a role in decarbonizing Europe and lowering electricity prices. Most continents have areas like the Sahara nearby which offer high-irradiance sunlight year round - the American Southwest, Northern Chile, Western China, Australia, etc. - we just need to build longer transmission lines.

Hello, CE subscriber. It’s been a while since my last post. Over six months actually. I’ve been hard at work on my Master’s degree in energy and climate economics here in Barcelona. After submitting our thesis and finishing my final exam last week, I’m going to be enjoying Europe for a while. I’ll be back in New Mexico in August to start my new position as an Economist for the NM Economic Development Department, which I’m very excited about.

Unfortunately, it seems as though I’m coming back to a very different US than the one I left in August. Trump has instigated a full-blown attack on democracy, science, and the reputation of my country. I admit that it’s embarrassing being an American in Europe these days, which was not the case just 10 months ago. In fact, I was quite proud and bullish on our prospects as a country. Of course it’s not too late to recover, but we have 3.5 more years of Trump yet to bear.

I don’t typically get political on this blog, but I will always bring my professional expertise to fight for the things that make people’s lives better. Things like clean energy and transportation, the Paris Climate Agreement, and progressive tax policy. Trump is aggressively attacking all of these things - particularly with MAGAs “One Big Beautiful Bill” (OBBB) now heading to Trump’s desk. As you’ve likely heard, this bill does a plethora of terrible things, but what I’ll be focusing on today is debunking Trump’s false claim that wind and solar are somehow bad.

I’ve spent the last 10 months learning from one of the best energy economists in the world, and I’ve been writing papers on electricity markets, transmission lines, grid-scale batteries, climate policies, and more. Over the coming weeks and months, I plan to share some blog-ready versions of the papers I’ve written on my own and with my colleagues.

This post will serve as a foundation for electricity economics and a reference for later as I dive deeper into the intricacies of energy policy. More importantly, I hope to show you why the Trump administration and their MAGA followers are so desperately wrong about renewable energy. Renewables reduce your electricity bill dramatically and reduce greenhouse gases, and I’m going to explain how in this post. So, without further adieu, let’s get into it.

The Economics of Electricity Markets

As it turns out, electricity markets offer a great setting to study economics. Not only is there a ton of data available, due to the data-heavy nature of the industry, but electricity markets work in a way that clearly illustrates supply and demand. I’ll start by explaining how electricity markets operate from country to country; then I’ll illustrate the economics; and, finally, I’ll explain the challenges we face next and the inevitable success of renewable energy.

How do electricity markets work?

Electricity is a homogenous good. In other words, electricity cannot be differentiated by source or producer. Electricity is just electrons flowing from a generation source to consumers:

Since there’s no such thing as “better” or “worse” electricity, all we really care about as consumers is the price. Socially and environmentally, we may care about how our electricity is made - preferring renewable and clean sources - but knowing the source of your power doesn’t really change how anyone consumes electricity. In fact, electricity consumption doesn’t change much as prices change either - making electricity one of the more inelastic goods we consume day to day.

Electricity markets are a classic example of a natural monopoly. This just means that it’s more economical for one entity to supply energy to your home than it is for multiple companies to compete for your business. For more than one company to compete for transmission, they would each need their own grid throughout the region - effectively doubling the fixed costs for electricity delivery on a regional economy - which would be a silly way to operate an electricity market.

Instead, we’ve found that it’s cheaper to share the costs of building and maintaining a single grid, but we still need to think about the market power that monopolies carry if left unchecked. Monopolies in any industry have great market power - i.e., monopolies have the ability to manipulate prices by manipulating supply, demand, or both. And because price elasticity of demand for electricity is inelastic, this would make it easy for electric utilities to take advantage of consumers by increasing prices and earning unreasonable profits. To protect consumers from this, governments regulate their electric utilities (and other utilities) on a spectrum between two main categories: liberalized markets and regulated monopolies.

Liberalized vs. regulated electricity markets

No two electricity markets operate in the same way, but there are two general camps that they reside in: Liberalized and Regulated Monopolies.

Liberalized markets open up regional generation to a competitive bidding process while the transmission and distribution of electricity operate as a monopoly. This is how grids operate in Europe, Texas, California, and much of the developed world. For example, California’s Independent System Operator (CAISO) auctions generation rights to private companies that generate electricity via renewables, gas, etc., and the cheapest fuels are obviously bought first - because electricity is a homogenous good.

Regulated monopolies operate on the other end of the spectrum. They own everything from the generation plants to the transmission and retail distribution. These grids can be either government-owned or privately-owned, but will be heavily regulated by price or revenue. There aren’t many grids that operate on this extreme of a monopoly level anymore - many grids are a hybrid between liberalized and regulated monopoly, including New Mexico’s Public Service Company (PNM).

PNM is privately-owned, regulated by the New Mexico Public Regulation Commission (PRC), and is vertically-integrated (PNM owns much of it’s own generation), but they also purchase electricity wholesale through long-term contracts with private generators and from other markets, including now CAISO. Connecting regional markets enhances reliability and reduces price spikes for all parties.

Here’s a map of the liberalized (Wholesale) electricity grids in the US, with the grey areas being regulated monopolies or hybrid markets:

Now, for the rest of this post were going to focus on liberalized markets because they offer the cleanest insight into the economics of energy and the efficiency of a competitive market. In reality, regulated monopolies, hybrid markets, and fully liberated markets operate under the same economics if regulated properly, but that depends on the case. I may write more about the trade-offs between liberalized and regulated markets in a future post, but today I’d like to focus on the intuition of the economics.

So, let’s talk supply and demand.

A matching game

Electricity markets are a modern miracle if you think about it. The grid operator has the difficult task of matching supply and demand every hour of the day, 365 days a year. If they supply too much or too little to the grid, the equilibrium is broken and we experience a blackout. In liberalized markets, the matching game is supported through a competitive bidding process. Generators submit bids in electricity markets - including long-term contracts, day-ahead bidding markets, and real-time (or intraday) markets - to meet anticipated demand.

The grid operator carefully matches supply and demand in every hour as every hour comes with different demand, renewable generation capacity, etc. - making each hour of the year is it’s own “market” with unique supply and demand equilibriums. Some markets even operate on 30- or 15-minute frequency.

Electricity generators compete in each of these markets - bidding prices that will cover their costs of operating while undercutting their competitors - earning themselves the right to participate in the market. If they earn a spot in the line-up, they generate the quantity of electricity they committed to in the auction, and in return they receive as payment the highest bid selected in the auction, not the price they bid. This is an important distinction: electricity generators receive as payment the highest accepted bid in that market - not the price that they bid.

How do generators know how much to bid?

As private actors in the economy, generators need to earn back the money they invested into the project over time plus a profit. I.E., they need to earn back the fixed costs (the cost of building the generation technology, acquiring the land, etc.), marginal costs (the costs of operating the technology for a given MW of generation), plus a profit incentive.

In a competitive market, economic theory shows us that wholesalers will bid a price per MW that is equal to their marginal costs because they will often earn more than their marginal costs in return. Remember, if another (more expensive) technology is selected after them in the auction, in return they earn back more than their marginal costs - which goes toward paying back their fixed costs over time. This is the beauty of a competitive wholesale electricity market - in theory, consumers get the lowest prices possible for the quantity of electricity they are demanding, and the market can efficiently cover costs and invest in cheaper generation.

Let’s graph the supply and demand to illustrate.

As noted, the marginal costs of each technology in the generation mix available become the bidding prices and make up the supply curve below (the colorful stepped line). The demand curve (the near vertical black line slanting downward) is the price consumers are willing to pay per MW of electricity. The near vertical slant of the demand curve illustrates the inelastic nature of electricity. Wherever the supply and demand curves cross each other, we end up with the price of electricity consumers see on their bill (P*).

Of course many consumers opt into stable prices, or other pricing schemes, but P* is likely the price consumers pay on average. You can plainly see how the most expensive generation type by marginal cost sets the price of your electricity. While this graph is simplified, it is true that solar, wind, hydro, and other clean technologies have marginal costs at or near zero thanks to their automatic nature - once the generation plant is built, the electricity is basically free.

Gas and coal plants have fuel and other operating costs that are priced into their bids (marginal costs), making them more expensive, and often making them the “price-setting” technology on the supply curve. Let’s see what happens when we double the amount of solar for this given market.

Here you can see that if demand stays the same, gas is no longer “in the money,” and therefore the price of electricity goes down for consumers. This is exactly how adding more renewables to the grid lowers the price of electricity. It’s not hard to imagine how a grid that is completely supplied by renewables could supply almost free electricity to consumers. In markets with high amounts of renewables, like in South Australia, there are many hours of the day in which electricity is free.

Emissions from electricity generation generally come from the most expensive sources - which provides all the more reason to get rid of them. Coal is by far the dirtiest fuel on the market despite being cheaper than gas, but this could be easily fixed with a carbon tax. In markets with a carbon tax, like California or the UK, coal will generally be further up the supply curve:

The carbon tax internalizes the climate externality, it often causes coal to be “out of the money”, and it further increases the profits of renewable generators and further incentivizes private investment in renewables.

These graphs show how profitable it is to be a renewable energy producer today, with or without a carbon tax, as they are earning everything between their marginal cost (colorful line) and P* as profit. This is driving unprecedented investments in renewable energy as investors aim to undercut the incumbent dirty fuels - driving out the dirty fuels and resulting in a cleaner grid over time.

Intermittency and rising demand

So far, this all sounds great, but what happens when the sun isn’t shining and the wind isn’t blowing? It’s true that renewables can’t always be online by their very nature, but it’s not the problem Trump believes it is. He often claims renewables are unreliable and increase electricity costs, but his narrow vision has fooled him and his followers. As we’ve discussed, renewables often don’t set the electricity price - gas and coal do. So whether the wind is blowing and the sun is shining or not, we can only blame the least efficient generators: coal and gas.

Furthermore, technologies like grid-scale batteries and long-distance transmission lines (interconnectors) are becoming cheaper and more efficient - further increasing renewable generator’s ability to provide cheap, clean energy. Batteries and interconnectors will be our tools to fight intermittency as investors build them to move energy through space and time to undercut the price-setting technology. The UK has found great success using these tools to achieve their climate goals and lower electricity prices in the face of intermittency - this is the subject of my thesis which I’ll write about very soon.

As the economy demands more EV’s, electrified appliances, and AI, the strain is going to challenge our current grid. Renewables, batteries, and upgraded grid technologies (like interconnectors) are needed to satisfy this increasing demand. Our simple supply and demand model above shows us that when we decrease renewables and increase demand, we get higher prices and give more market power to coal and gas generators, allowing them to increase prices.

The Implications of MAGA’s OBBB

Trumps bill is horrible for your electricity prices, the environment, and US geopolitical dominance:

• Prices: Republicans are killing IRA clean energy incentives for wind, solar, and batteries, and actually increasing taxes on these technologies. This will result in less (but not zero) investment in these technologies over time - affecting the bidding prices for wholesale electricity generation and the price you ultimately pay month-to-month for energy.

• Environment: By slowing down clean energy investments, we are extending the possibility of us reaching net-zero further into the future. This will obviously lead to more warming, more climate damages, and a more expensive task for future generations.

• Geopolitical security: China is subsidizing and building unprecedented amounts of clean energy, and is now set to dominate the clean energy race as the IRA is decapitated. This will affect our ability to affordably leverage AI and expand the manufacturing economy Trump claims to care about.

In summary, Trump and the Republicans are just plain wrong about renewable energy, and we will be set backwards because of it. It’s unclear whether they are ignorant to the economics or bought-out by oil and gas, but both storylines are troubling.

To me, there is a silver lining in all of this: its the fact that Trump’s goal of killing renewable energy will never win in the end. Even though Trump is attempting to change the playing field in favor of dirtier, more expensive fuels, the economic case for clean energy is simply too strong. Trump is doing everything he can to pander to his rich oil and gas executive friends, but the economics are luckily not on his side.

The land value tax has been touted by urbanists, environmentalists, and economists of all political leanings for its efficiency and fairness, but it has yet to gain traction in 99.99% of US cities. I’ve wanted to do an in-depth Complex Effects post about land value taxes, and the reasons it may be an underutilized policy tool, and this grad school game theory assignment gave me the perfect opportunity to do so. While this essay is quite academic in nature and longer than my average post, I hope you enjoy it.

The land value tax (LVT) is a land taxation scheme where the government collects taxes levied from the value of land. This is in contrast to the property tax, which has won out in modern US cities, where the government taxes the value of the land and all improvements made upon the land. Unlike the property tax, the LVT does not tax improvements made to a piece of land, therefore incentivizing landowners to make their property productive by building housing and discouraging land speculation.

19th-century American political economist Henry George was a staunch supporter of the LVT, advocating that the LVT should be the primary means in which government revenue is derived. The LVT is a popular tax among economists as it creates positive externalities: more housing, improved infrastructure, higher property values in surrounding areas, and a strong tax base for the government. Even libertarian economists like it as Milton Friedman famously called it “the least bad tax.” Despite its popularity among economists, just over a dozen cities in the United States operate with some form of LVT - all of which are in Pennsylvania - and most of them still operate with a proportion of land taxes being derived from property taxes.

The game I’m arguing exists here involves three players: the policymaker, the landowner, and the renter. This is a sequential game that shows two things: 1) Why land value taxes would be an efficient and progressive form of land taxation, and 2) the equilibriums currently perceived and the reasons why property taxes are much more popular. Before I get to the game, I will first explain the economics of the LVT, which is necessary to understand the payoffs and strategies within the game.

The Economics of the Land Value Tax

Land taxes in the United States are used to fund schools, public infrastructure projects like roads and trains, sports stadiums, and much more. 99% of these funds are derived via property taxes, which includes the value of the land and all improvements made to the land. Land value taxes, on the other hand, are levied only on the value of the land.

Land taxation has some unique economic implications given that the supply of land on Earth cannot be changed. Of course, artificial land can be made on the coastal boundaries of places like New York City, but for the most part, land is a fixed asset that cannot practically be created or destroyed - making its supply curve a vertical line (Figure 1). Demand for land follows a typical curve - as the price of land increases (y-axis), the quantity demanded decreases (x-axis).

Figure 1

Let’s focus on the two graphs above. Figure 1 panel A depicts the supply and demand curves of most “normal” taxed goods - like Coca-Cola. As prices increase, Coca-Cola Inc. is more willing to supply higher quantities of the drink. Furthermore, as the price of Coke increases, demand for it decreases. Now suppose the government imposes a tax on Coca-Cola, and the cost of the product increases. The cost of the tax is shared by Coca-Cola and the consumer, with the consumer’s tax burden represented as the portion of the green “Tax revenue” box above the dotted line labeled P*, and Coca-Cola pays the portion below P*. The red triangle represents the “Deadweight Loss,” or the value lost by the consumer and supplier as a result of the market distortion caused by the tax. Policymakers are meant to try to avoid such market inefficiencies whenever possible.

Like Coca-Cola, land improvements (like housing, shops, and any other building or improvement) have a similar upward-sloping supply curve, meaning the same deadweight loss is present when it is taxed. In the case of housing, renters and landlords share the cost of property taxes.

Figure 1 panel B depicts the vertical supply curve of land. There is a fixed amount of land - creating perfect inelasticity. When land is taxed, notice there is not only zero deadweight loss, but the entire tax burden must be borne by the landowner according to the theory made famous by political economist Henry George, and empirical evidence showcased by Hoj et al. in their paper Land Taxes and Housing Prices.

Furthermore, the price of land and housing would decrease under an LVT. The economic rent produced by the land remains unchanged, but more of the economic rent is captured by the government, decreasing the profits of the landowner - making the land less valuable to potential investors and cheaper for the renter. Of course, long term, the incentives landowners would have to improve their land would increase the value of surrounding land and vice versa.

Before we move onto the game theory, the economic implication important to highlight here is that the introduction of an LVT would drastically shift economic power away from landowners. Landowners practicing land speculation, i.e. investors holding onto unproductive land waiting for it to appreciate, would suddenly either want to sell their land to avoid the LVT, make their land more productive in order to afford the tax, or lobby their City Council to get them to reverse the policy. This would cause a sudden change in how real estate investors, typically very influential people, operate in the area - putting the political feasibility of the LVT into question. More on that later.

Game Theory of Land Taxation

The three players in this game: the policymaker, landowner, and renter, all have decisions to make in this sequential game, so let’s inspect each of their decisions one by one based on the game payoffs depicted in Figure 2.

Figure 2

First, the policymaker needs to impose a tax on the citizens of the land in order to pay municipal bills, build infrastructure, and provide services to its citizens. They’re considering two options: the property tax and the land value tax. For results sake, we will assume that the tax revenue for each of these options will be similar. In reality, this may be true in the short term, but not in the long term. Increased land improvements would ensue under the land value tax, and would increase the value of surrounding land in the future, likely giving the city more property taxes.

While we're assuming the municipal government would receive the same amount of taxes from the land value and property taxes, we’re also going to assume that the policymaker wants its citizens to not move away. Therefore, the payoffs for the policymaker are lower in scenarios where the renter moves out of the city.

Second, the landowner must make decisions based on the decisions made by the policymaker. Under either the property tax or the land value tax, they must decide to sell their land, rent their land, or speculate on it. Depending on the tax scheme, the potential payoffs vary, with the property tax being their preferred situation. With this in mind, they would likely threaten to the policymaker, and renters who vote for the policymaker, that they will simply pass the new LVT on to the renters if the policymaker decides on the LVT. If all of the players in this game knew there was no deadweight loss with pure land value taxes, they would know that that is a threat that cannot be backed up. It’s cheap talk.

Third, the renter must decide whether to rent from the landowner, look in another neighborhood, or move to a different city. The renter does not want to move out of the city because it’s expensive to do so, but they will if it means they can find cheaper rent.

Now, let’s consider the main scenarios.

If the policymaker chooses to impose a property tax on its citizens, the landowner has several good options. They could sell their property for a decent profit, try to rent it for as much as possible, or they could speculate on it and hold it for a while. Perhaps the land is raw, unimproved land near the city center and it’s expected to double in price over the next 15 years. There’s little incentive to build because any improvements made to the property will be taxed, and the construction process is costly and stressful. Sitting on the land for a while is a great option.

Now let’s say the land near the city center already has a building on it but it’s in bad shape. It’s really old, needs a lot of improvements, and currently has no tenants. They could try to fix it up and make it rentable, but again, any improvement made to the land would increase the property value, and increase their taxes, and it could be costly and stressful to renovate. Furthermore, if the landowner is an experienced real estate investor, there are huge tax incentives for holding onto vacant land. Whatever their reason is to speculate instead of sell or rent, the landowner gets a good payoff. There is little incentive to deviate from this position unless they are motivated to receive rental payments.

Let’s now consider the case where the landowner has a property that they want to rent out. They are now in a two-by-two game with the renter. The landowner has two choices: absorb the cost of the property tax, or pass it on to the renter. Under the property tax scheme, the landowner knows they can get away with passing on at least part of the cost of the tax to the renter. Whether the landlord passes on the cost to the renter or not, the renter would rather rent than move. The landlord knows this and decides to pass on the cost of the tax to the renter, thus implementing a dominant strategy in the game under a property tax scheme and deciding the payoff of the renter. Furthermore, the landowner and the renter know that even if this game was repeated many times, the result of the game would always turn out the same.

Furthermore, this branch of the game has an interesting twist in that as it is repeated N times, the quality of the building deteriorates. As mentioned before, there is little incentive for the landowner to make repairs and increase the quality of their building. So, over time, the building becomes worse and worse, eventually degrading into an unrentable vacant building in which the landowner can hold onto and use for tax deductions. In reality, this phenomenon results in high vacancy rates in what used to be productive areas of a city.

In a parallel universe, the policymaker decides to implement a pure land value tax. Again, we’re assuming their payoff is the same as under a property tax and they only care about keeping citizens from moving out of their town.

The landowner is now in a much different position. It is suddenly much less beneficial for them to speculate on their land. Under the LVT scheme, unproductive land is taxed at a relatively higher amount than under the property tax. They still may be able to generate tax deductions from owning vacant land, but their incentives have drastically changed. If their land is raw or has a vacant building on it, they are now better off either making it productive and renting it, or selling it. Notice now that the payoff for selling land is also less because a higher proportion of the economic rent generated by the land is being captured by the government. This isn’t because the government is earning more, necessarily, it’s just that the landowner is earning less.

Under the LVT, the best option for the landowner is to either sell their land to someone who plans on making it productive or make it productive on their own. After all, any improvements made to the land will not be taxed, but will generate more rental income. Let’s finally look at the two-by-two game between the landowner and the renter under the LVT scheme.

The landowner would love to pass the cost of the LVT on to the renter, but unlucky for them, the renter sees that the apartment buildings across town are much cheaper because that landlord is absorbing the cost of the tax themselves. So, if the landowner passes the cost of the tax onto the renter, the renter’s best move is to either move across town or move out of the city. Perhaps the landowner can get away with this initially, but over the long term they will continue to lose out to the competition.

If the landowner chooses to absorb the cost of the tax as LVT theory suggests, the renter’s best response is to rent from the landowner. Notice this is the most evenly distributed payoff between all of the scenarios.

The Subgame Perfect Nash Equilibria

Now that we understand the incentives behind the game, we can observe the Nash Equilibria of the game. As this is a sequential game, we have five important Subgame Perfect Nash Equilibria (SPNE) - two under the property tax and three under the land value tax. In other words, using backward induction, we can deduce the most likely outcomes within each subgame, or branch, of the game.

Looking at the property tax side of the game, there are two SPNEs: (PT, Rent, Pass, Rent), and (PT, Speculate, Pass, Rent). In the first one, the landowner and renter agree to rent with the property taxes passed onto the renter. The landlord holds the dominant strategy, and therefore the power, in this game. The second equilibrium is where the landowner chooses to speculate on their land. This is the best payoff for the landowner in many cases and there is nothing the renter can do to change this. The policymaker, on the other hand, can do something about it.

This brings us to the three important SPNE on the LVT branch of the game: (LVT, Sell, Absorb, Rent), (LVT, Rent, Absorb, Rent), and (LVT, Rent, Pass, Move). The policymaker can incentivize the landowner to choose an option outside of speculation by adopting the LVT. The landowner has no incentive to speculate and would much rather sell or make their land productive.

The next SPNE is where the landowner tries to pass the cost of the tax onto the renter so the renter chooses to move somewhere else. This is only an equilibrium because the landlord is indifferent between their two options when the renter is deciding to move. The last SPNE is where the renter rents and the landowner offers fair rent - bearing the cost of the LVT.

Now that we have the entire game analyzed and the equilibriums identified, we can speculate on why only about a dozen US cities have adopted the LVT. Obviously, real-life US policymakers are not indifferent between the property tax and the LVT - they strongly prefer the property tax. This could mean two things - either we have not properly identified the correct payoffs within the game for the policymaker, or the policymaker is unaware of all of the payoffs within the game. The latter could be a fair description of the discrepancy as land value taxes are a rather unknown policy tool. Though the former, that we have misidentified the payoffs, seems to be a likely cause as well.

We could argue that the payoffs should reflect the policymaker’s preference for the land value tax as maybe they understand the importance of reducing deadweight loss and housing prices. But, adding a point to all of the policymaker payoffs on the LVT side of the game feels wrong given the fact that the real world shows the most-likely equilibrium obviously lies on the property tax side of the game.

This means either the policymaker perceives or receives more utility by opting for the property tax. Perhaps they themselves are landowners and know that profits are easily extracted through a property tax. Perhaps a majority of political donors request the property tax in exchange for their ongoing campaign contributions. While this is all speculation, the motivations that keep property taxes the status quo in 99.99% of US cities likely have something to do with the shift in landowner incentives that would result from adopting a land value tax.

Climate change is making the future of water more uncertain in New Mexico. New Mexico is a semi-arid desert with the smallest amount of freshwater as a percentage of surface area out of all 50 US states (USGS, 2024). The main water feature in the state is the Rio Grande, which starts in the high mountains of Southern Colorado, meanders through the center of New Mexico from the North to the South, and becomes the defining border between Texas and Mexico until it reaches the Gulf of Mexico. All along the Rio Grande, people have been dependent on the river as their primary source of water for thousands of years. The future of the river is in question as the climate changes and water extraction from the river and local groundwater exceed replacement rates (RGISC, 2024).

The river’s vulnerability is evident when you analyze the decreasing water levels of the man-made reservoirs along the Rio Grande. The largest reservoir is the Elephant Butte Reservoir in South-Central New Mexico. Elephant Butte Dam was completed in 1916, and at the time of construction, was the second largest of its kind in the world (Briseno, 2020). The dam provides renewable electricity to Southern New Mexico and several neighboring states. Elephant Butte is also the largest lake in New Mexico where people recreate. The main reason water is released is for irrigation in downstream areas (Phillips, 2020). The water level of the reservoir has varied greatly over time but has not been above 35 percent full for decades, as seen in Figure 1.

This project is an attempt to understand the variables that affect the water level of the Elephant Butte Reservoir and test relevant variables’ predicting capabilities using regression and machine learning techniques. The water level of the reservoir is affected by many factors - local drought, snow melt in Southern Colorado, evaporation, changing water laws, and groundwater extraction, to name a few. Furthermore, ongoing lawsuits between Texas and New Mexico underline the urgency of the issue as each state fights for water security (Blanco, 2024). Elephant Butte’s water level is determined by a complex system that is not fully explained with the models presented in this project, but evidence is presented that could guide policymakers to make informed decisions regarding sustainable water use.

Data

To analyze the fluctuating water level at Elephant Butte Reservoir, I utilized data from the United States Geological Survey (USGS), Water Data for Texas, Colorado State University (CSU), and The National Oceanic and Atmospheric Administration (NOAA). The dependent variable is the Elephant Butte reservoir's average monthly water level.

Groundwater levels and precipitation in Las Cruces, New Mexico, from USGS, were analyzed to capture the effect of the local agriculture industry, well water extraction, and the health of the local water table. Las Cruces, located in Dona Ana County, is the first significant city downstream from Elephant Butte Reservoir. Dona Ana County is the most productive pecan-growing region in the United States. Pecan trees are notoriously water-intensive, helping drive the agriculture industry in the state responsible for 76 percent of total withdrawals in the State of New Mexico. Sufficient data on water use and pecan production in New Mexico is lacking, but groundwater levels are shown to be directly tied to local uses, and the health of nearby rivers and streams (NMOSE, 2019).

Historical weather patterns were also captured in this analysis. Sierra County monthly temperature data was analyzed to capture possible effects of evaporation at Elephant Butte. Other data collected near Elephant Butte Reservoir include the flow rate of the Rio Grande above and below the reservoir. San Acacia is one of the last USGS stations measuring the flow rate of the Rio Grande before it gets to Elephant Butte. Once the water reaches San Acacia, it can no longer be diverted to Acequias for irrigation, as it is throughout Central and Northern New Mexico (Phillips, 2005).

Drought and wetness indices were captured to help further explain the water demand of farmers in Southern New Mexico and the water supply for the upper Rio Grande basin. These variables were captured from drought.gov. These two variables could be seen as inverses of each other, and they largely are, but not always. An absence of drought does not always mean there is moisture, and vice versa.

Further upstream, snowfall data from Wolf Creek Ski area in the San Juan mountains of Southern Colorado was analyzed to help represent the significant contribution of water Elephant Butte receives from snow melt every spring.

Other relevant data is sure to be missing from this analysis regarding Rio Grande water sharing (and fighting) between New Mexico, Colorado, Texas, and Mexico. Ongoing lawsuits between New Mexico and Texas highlight the obvious struggle for water rights between the states, and future prediction models should attempt to capture that complexity.

Data Cleaning

Several missing observations had to be accounted for in this analysis. Each variable has a varying level of completeness, which limited the timeline analyzed and, ultimately, the variables that were used.

First, the Wolf Creek snowfall data ended in 2001, and similar data was difficult to attain. Nevertheless, an analysis of the explanatory power of this variable was conducted, and for reasons explained in the next section of this paper, the Wolf Creek snowfall data was omitted from all of the prediction models.

Second, there was an observation missing for October 2016 in the San Acacia flow rate data. To compensate for this, an observation was created by replacing the NA with the average of all other October observations in the dataset.

Third, the data set on groundwater levels in Las Cruces, NM had gaps that were replaced with best estimates. There were 18 sporadic months missing in the 1980s, 1990s, and 2000s, and a significant gap from March 2011 to December 2022. All of these missing variables were filled using spline interpolation - which effectively estimates the trend line between available data points (see Figure 2).

Feature Engineering

Two sets of variables were created to help improve the predicting capabilities of the models: 10 snowfall lags and 11 monthly dummies; and the drought and wetness indices were constructed using the spectrum of drought and wetness indexes provided by NOAA on drought.gov. The NOAA provides indices of drought severity in a spectrum of D0:D4 and wetness severity in W0:W4. For the purpose of this prediction exercise, these two spectrums were aggregated to capture the severity of each index in simpler form.

The Wolf Creek Snowfall data was meant to help capture the seasonal effect of snow melt coming from Southern Colorado and Northern New Mexico into the reservoir. While the literature shows more snow in the upper Rio Grande Basin leads to a fuller Elephant Butte reservoir, it is difficult to know when this snow melts and makes its way past San Acacia. Therefore, 10 lags were created in an attempt to see how long it took to see a positive correlation between snow in Wolf Creek and water increase in Elephant Butte. After trying several variations of regressions using the lags, the results were inconsistent and statistically insignificant. It’s likely that more data is needed regarding snowfall in the Upper Rio Grande Basin and its lagged effect on water levels in Southern New Mexico. These lags were not included in the final iterations of the models, but the Wetness index likely serves as a decent substitute as it captures moisture in the New Mexican region of the Rio Grande Basin.

In the initial regression analyses, the date variable was included. The coefficient for the date variable was statistically significant at the 1 percent level, leading to an extremely high r-squared of 0.99 in many of the models. This was likely due to the time period analyzed (1984-2022) and the downward trend line apparent in the water level during this time period. This would likely cause out-of-sample prediction errors and extreme over-fitting, therefore the date variable was excluded from the models.

To replace the date variable, 11 monthly dummy variables were created to capture the seasonality of the water level in the reservoir, leaving the twelfth month as the base. This allowed the model to capture the passage of time without influencing the model with misleading trend lines. Furthermore, the monthly dummies help replace the effect of lagged monthly snow melt from Southern Colorado that was difficult to interpret with the snowfall data and help capture irrigation seasonality in Southern New Mexico.

Methodology and Results

Seven prediction models were compared to find the most appropriate way to predict water levels in the Elephant Butte Reservoir: linear regression; LASSO, RIDGE, and Elastic Net Regressions; k Nearest Neighbors (kNN); Random Forests; and a Classification and Regression Tree (CART). First, we will review the results that were common among all of the models, then we will analyze the differences among them.

All of the models found that the most important explanatory variable, of the ones analyzed, is the groundwater levels in Las Cruces. In a model where Las Cruces groundwater is the only explanatory variable, the r-squared is 0.669 - meaning the Las Cruces groundwater levels alone can explain roughly 66.9 percent of the change in water levels in the Elephant Butte reservoir.

As with the rest of the models, the linear regression results in Table 1 show statistical significance for the San Acacia Flow Rate and the drought index, yet the largest coefficient and t-value comes from Las Cruces groundwater. The negative coefficient of -3.16 says that for every foot deeper below the surface groundwater is, the water level of the Elephant Butte reservoir is lower by 3.16 feet, give or take 0.11 ft (Std. Error).

Predictions

Linear Regression, LASSO, RIDGE, and Elastic Net

The linear, LASSO, RIDGE, and Elastic Net regressions all give similar predictions as seen in Figures a, b, c, and d. The relative Root Mean Squared Errors (rRMSE), or the average deviation from the actual water levels as a proportion of the total range, for these four regressions, are 0.165 for the linear regression, 0.169 for LASSO, 0.166 for RIDGE, and 0.166 for Elastic Net. This result is expected all of the regressions operate in similar ways. The important information taken from these regressions is the variables that could be dropped to improve the overall fit of the models.

The Elastic Net model coefficients revealed several variables that have little to no predicting capabilities: Sierra County temperature, Dona Ana County precipitation, and several monthly dummies. Figure 4 illustrates how several coefficients were driven to zero by the Elastic Net model and deemed less important. Sierra County temperature is insignificant likely due to co-linearity with the monthly dummies. Still, this is surprising as much of the literature regards evaporation as a contributing factor to water level loss in the reservoir, but it’s possible another variable exists that can better account for evaporation.

kNN, Random Forest, and CART

The k Nearest Neighbors (kNN), Random Forest, and Categorization and Regression Tree (CART) models were all performed with a 70/30 randomized split of the training and testing data. The results of each of the models vary as follows:

The kNN predictions (Figure e) had a relative RMSE of 23.5 percent and an r-squared of 0.51, making this the worst-performing model in this exercise. This is not completely surprising given the variables used to train the model. As seen in Figure e, kNN had a hard time predicting the sudden drop in water levels during the early 2000s and was sensitive to less important variables. The Random Forest and CART models, on the other hand, were capable of highlighting the importance of the strongest variables, such as Las Cruces groundwater.

The Random Forest model had a relative RMSE of 12.1 percent and an r-squared of 0.86. Figure f illustrates the strong predicting capabilities of this model. This model was only outperformed by the CART model, which had a relative RMSE of 11.8 percent and an r-squared of 0.87.

The CART model was tuned with a 15 minsplit and 0.075 complexity parameter. More complexity than this didn’t produce much more predicting capabilities in trial. Despite being more of a categorization tool, CART succeeded likely due to the existence of strong predictor variables. As seen in Figure g, CART’s predictions have less movement compared to the other models, illustrating its categorizing nature. The CART decision tree (Figure h) gave decision-making power mostly to Las Cruces groundwater - where all predictions were made using this variable when groundwater was greater than or equal to 13 feet below the surface. The only other two decision-making variables in this model were the San Acacia flow rate and the state wetness index.

Conclusion

Many of the variables explored during this prediction exercise held little to not predicting power, but by using just a few key variables, strong predictions were possible. The CART model gave the most reliable predictions using the following variables: Las Cruces groundwater levels, Rio Grande flow rate at San Acacia, and the New Mexico state wetness index.

These results give important context to the issue of water scarcity in New Mexico. According to the Food and Water Watch, ”Two agricultural industries dominate water consumption. Alfalfa, the state’s dominant crop, guzzled 85 billion gallons of water in 2021, and pecan irrigation used another 93 billion gallons — sucking up 178 billion gallons between the two”(2023). Groundwater extraction has direct implications on the flow of the Rio Grande, the level of the Elephant Butte Reservoir, and, therefore, all of the cultural, economic, and recreational value New Mexicans receive from the Rio Grande. This analysis suggests that groundwater level will be a telling factor in predicting water levels in the Elephant Butte reservoir over the next several decades.

References

1. Albuquerque Journal. (2024). ”The Rio Grande: Arts and Lifestyle.” Available at: https://www.abqjournal.com/lifestyle/arts/article1c30c171 − 07be − 5b88 − 93ee − 36f ed38d351b.html[AccessedN ovember17, 2024].

2. Colorado State University. ”Climate Data Access.” Available at: https://climate.colostate.edu/dataaccessnew.html[AccessedNov.17, 2024].

3. National Integrated Drought Information System. ”Drought Historical Infor- mation - New Mexico.” Available at: https://www.drought.gov/historical- information?dataset=1selectedDateUSDM=20241119state=New-MexicoselectedDateSpi=20240901 [Accessed November 17, 2024].

4. Water Data for Texas. ”Elephant Butte Reservoir.” Available at: https://waterdatafortexas.org/reservoirs/individual/elephant-butte [Accessed November 17, 2024].

5. Food and Water Watch. (2023). ”New Mexico Water Crisis.” Available at: https://www.foodandwaterwatch.org/2023/07/06/new-mexico-water-crisis/: :text=Two[Accessed November 27, 2024].

6. Hlavac, Marek. (2022). stargazer: Well-Formatted Regression and Summary Statistics Tables. R package version 5.2.3. Available at: https://CRAN.R-project.org/package=stargazer.

7. National Centers for Environmental Information. ”Climate Data Online.” Available at: https://www.ncei.noaa.gov/cdo-web/datasets [Accessed November 17, 2024].

8. New Mexico Office of the State Engineer. (2015). ”Water Use Report for New Mexico, 2015.” Available at: https://www.ose.nm.gov/WUC/wucTechReports/2015/pdf/2015[Accessed November 27, 2024].

9. Rio Grande International Study Center. ”About the Rio Grande.” Available at: https://rgisc.org/about- the-rio-grande/ [Accessed November 17, 2024].

10. Blanco, D. (2024). ”Texas and New Mexico Water Dispute Reaches Supreme Court.” The Texas Tribune. Available at: https://www.texastribune.org/2024/11/04/texas-new-mexico-water-dispute-rio- grande-supreme-court/ [Accessed November 17, 2024].

11. U.S. Bureau of Reclamation. ”Elephant Butte Reservoir Data.” Archived at: https://web.archive.org/web/20060926130025/http://www.usbr.gov/ [Accessed November 15, 2024].

12. U.S. Geological Survey. ”How Wet is Your State? The Water Area of Each State.” Available at: https://www.usgs.gov/special-topics/water-science-school/science/how-wet-your-state-water-area- each-state [Accessed November 17, 2024].

13. U.S. Geological Survey. ”National Water Information System: Monthly Streamflow Data.” Available at: https://waterdata.usgs.gov/nwis/monthly?referredm odule = swsiten o = 321740106481004por321740106481004238876 = 1996815, 72019, 238876, 2002 − 09, 2023 − 08format = htmltabledatef ormat = Y Y Y Y − MM − DDrdbcompression = valuesubmittedf orm = parameterselectionlist[AccessedNovember15, 2024].

14. Phillips, F.M., et al. (2005). ”Reining in the Rio Grande: People, Land, and Water.” Water Resources Research, https://agupubs-onlinelibrary-wiley-com.sare.upf.edu/doi/full/10.1029/2005WR004427 [Accessed November 17, 2024].

A second Trump term doesn’t bode well for the urbanist, progressive, or climate policies I’ve discussed on this blog. Now that the GOP controls the White House, the Senate, and possibly the House of Reps, we should only expect climate policy regression at the Federal level - at least for the next couple of years. Trump has talked about dismantling the EPA, reversing the Inflation Reduction Act, cutting spending for public transportation, and ‘unleashing big oil’, and I’m sure he’ll accomplish much of that. But I don’t want to dwell on that today. I’ve always tried to keep this blog optimistic, and there’s still work to be done - particularly at the state and local levels.

A second Trump presidency means blue states and cities need to become strongholds for climate action. That doesn’t necessarily mean local Democratic politicians need to pass the most aggressive climate policies there are - I mean, that would be nice - but it means Democrats should start looking to the policies that actually have a chance of passing.

When contemplating climate policies, policymakers should consider the policy’s overall efficiency. Four quadrants of efficiency should be considered: Cost Efficiency, Effectiveness, Feasibility, and Fairness. My professor, Mar Reguant, and her colleague, Natalia Fabra, in their paper The energy transition: a balancing act (2023) argue that it is not enough for a policy to simply be cost-effective if the resulting efficiency only benefits the rich; and it is not enough for the policy to be effective if there isn't a politician willing to attach their name to it.

On this backswing in the political pendulum, the top right quadrant in the efficiency chart below becomes more important than ever.

Objectively, a carbon tax set at a level equal to the social cost of carbon ($190) would be the most cost-efficient way to decrease greenhouse gas emissions economy-wide, but it is wildly unpopular in the United States. The political left doesn’t like that it’s regressive at face value (even though you can return the proceeds in the form of a rebate and make it progressive) and some think it’s perverse to “sell the right to pollute.” The political right doesn’t like a carbon tax for obvious reasons. Proposing any tax is political suicide in the US these days.

Furthermore, a carbon tax at the state level, while efficient, may promote carbon and economic leakage - meaning firms would simply choose to emit carbon and do business in (leak into) a neighboring state. Because of leakage, a carbon tax would make the most sense nationally or internationally. And that’s not going to happen anytime soon. Therefore, until a carbon tax becomes more popular nationally, we need to look elsewhere for emissions reductions.

States with Democratic Governors may be able to pass electric vehicle mandates, like Advanced Clean Cars, via rulemaking procedures. States with majority Democratic legislatures may be able to pass more politically resilient policies like the Low Carbon Fuel Standards.

When thinking about decarbonizing the transportation industry, the Low Carbon Fuel Standard (LCFS) - or the Clean Transportation Fuel Standard (CTFS) as it’s known in New Mexico - is cost-efficient, effective, fair, and much more popular than a carbon tax. It’s not a perfect policy, but it decreases emissions and is politically feasible for blue states. Some claim it has negative land-use implications due to ethanol production, but perfect can’t be the enemy of good. Let’s take what climate policy we can get. Feasible state-level climate policies will survive a Trump Presidency and allow parts of the US to make progress in a warming world.

I’ll illustrate the importance of finding politically feasible climate policies using the Low Carbon Fuel Standard as an example.

What is the Low Carbon Fuel Standard?

In brief, the Low Carbon Fuel Standard is a market-based policy aimed at decreasing the carbon intensity (CI) of the transportation fuels available to consumers. It is fuel agnostic, meaning it applies to all transportation fuels, such as electricity, gasoline, diesel, hydrogen, biofuels, etc. The state sets a carbon intensity standard that decreases over time - in most cases, by 20% by 2030. Some states like New Mexico are more stringent and will further require a decrease of 30% by 2040.

Looking at the graph above, the CTFS becomes quite intuitive. If you are a producer producing transportation fuels with a carbon intensity below the dotted line, you will generate credits and sell them to producers producing fuels above the carbon intensity line. As the CI standard decreases over time, the mix of transportation fuels will have a lower and lower carbon intensity, and the transportation industry therefore emits less carbon into the atmosphere.

For more basics on the CTFS, you can look at the NM Environment Department’s Climate Change Bureau site or California’s Air Resources Board site.

Support for the LCFS

Support for the Low Carbon Fuel Standard (LCFS) was studied in a few different papers we will glance through now briefly.

Rhodes et al. note, “Numerous studies have shown that market-oriented regulations such as the LCFS are more widely supported by the public than carbon pricing policies” (2014, 2015). This is one of the most significant findings. This means that framing climate action in the context of the “free market,” where you’re not explicitly taxing or banning high-carbon fuels, and instead encouraging competition, makes the climate action more popular.

To some on the far left, this is a bad thing. As I wrote in this piece:

In a nutshell, the far left thinks anything that slightly resembles capitalism is a bad thing. I argue that there isn’t time to “dismantle” capitalism before we address climate change. Plus, according to the most recent election, the US is moving further right. Climate advocates need to be ok with meeting the rest of the country where they’re at. If a policy reduces emissions and centrist Democrats are willing to vote for it, it’s a policy worth considering.

Another study shows that support in Canada and California is high for the LCFS at the current 20% CI reduction by 2030 framework. They also find support is lower for zero-emission vehicle mandates and much lower for carbon taxes:

Interestingly, support for the LCFS remains high when the policy calls for an 80% CI reduction by 2050. In fact, support/opposition remains virtually unchanged across all the policies at much higher stringency levels:

This confirms that people are more willing to support market-based policies over taxes and mandates no matter the stringency.

The LCFS is as popular as vehicle emissions standards, more popular than ZEV mandates (like Advanced Clean Cars), and much more popular than a carbon tax. Therefore, the LCFS holds less political risk than a carbon tax or ZEV mandate - giving it the potential to enable greater emissions reductions than we are currently demanding from it.

The study finds that policies framed around industry requirements instead of individuals are more publicly supported. Even though both “would likely indirectly incur costs to consumers…, survey respondents may not have perceived this potential impact from each policy” (Long et al., 2020).

Now, if the Low Carbon Fuel Standard is so popular, why haven’t more states enacted one?

More US states have ZEV mandates than have a Low Carbon Fuel Standard despite Long’s suggestion that they are less popular. There are four states with an LCFS in the US and 12 states plus DC have ZEV mandates. This could be due to what I mentioned before: ZEV mandates can typically be passed without legislative action - and instead via rulemaking. Low Carbon Fuel Standards are seemingly always enacted with explicit support from a state legislature, which is objectively more difficult and politically resilient than rulemaking.

For example, under Governor Bill Richardson, New Mexico adopted fairly stringent ZEV mandates in the mid-2000s. This was via EIB rulemaking and not the legislature. Once Richardson left office, the ZEV mandate was left vulnerable to the Republican administration of Susanna Martinez - who did away with the mandate. A stricter ZEV mandate has since been enacted during the Lujan-Grisham administration.

ZEV mandates should be a key strategy to reduce emissions at the state level, but its political vulnerability should be noted. For this reason, I believe the Low Carbon Fuel Standard is more powerful and should be considered by more blue state legislatures given the popularity of the policy.

Climate change was essentially a non-issue during this Presidential election cycle. Either that’s one of the reasons Harris lost, or maybe it’s not as important to the average voter - I don’t know. I’m not a political analyst, but if the climate is ever going to be a major and sturdy part of the Democrat’s agenda, Democrats should identify the policies that aren’t just effective, fair, and cost-efficient, but politically feasible.

If you’re in a state with a Democratic Governor and a red or purple legislature, maybe a ZEV mandate is the best that can be done for now. If you’re in a state with a blue legislature, market-based climate policies may have the political backing necessary to pass.

There are dozens of climate policies available to states, and states like New Mexico, despite having an LCFS, have a long way to go to decarbonize. I don’t know what the next four years have in store for the US, but I know that climate action is now up to the states.

I’ve been deep in the books here in Barcelona. For those who are new here, I am studying energy and climate change economics at the Barcelona School of Economics. I will regularly be deep in the books, but worry not - I plan to host guest writers on Complex Effects to help me satisfy my subscribers’ craving for new content. I’m excited to share with you talented political scientists, technological development experts, and, this week, one of New Mexico’s best poets.

I brought a book with me called New Mexico 2050 which opens with a great poem by New Mexican and poet-laureate Hakim Bellamy - who graciously granted me permission to share his poem with you all.

The poem circles many feelings I have about New Mexico - its enduring charm, its vulnerabilities in a changing world and climate, its elusive economic solutions, and the hope New Mexicans have for a better tomorrow.

The book, edited by former US Senator and political science professor at UNM Fred Harris, lays out a series of policy recommendations to help the state navigate a future of drought, rural-urban divides, and income inequality. Each chapter is written by varying respected economists, health care specialists, political scientists, Native American scholars, journalists, and more. I have not yet finished the book, but when I do, I’ll summarize my thoughts on this blog.

Anyways, the poem by Hakim Bellamy is below. Hakim is Albuquerque’s inaugural Poet Laureate (2012-2014), an award-winning author, and a Legislative Fellow at the U.S. House of Representatives. You can learn more about Hakim on his website, where you’ll find more of his poems, and his book-length collections can (and should) be purchased on the UNM Press website.

New Mexico 2050?

A Prefatory Poem

By Hakim Bellamy

New Mexico has been called
lots of things
by the Upper 48.

My favorite
is “recession proof.”
like some sort of backhanded condiment,
like vinegar, when I ordered chile,
like drought, instead of “desert,”
like climate change for dinner
instead of rain for breakfast.

But “mean”
is not what they mean.
When poor is the new normal,
you can’t feel the economy flatline.
Just like you could not feel it
when it was booming.
Just as the bottom of the ocean
is unmoved

by the waves.

What they meant
is “irrelevant,”
even “insignificant.”
Because we take everything
as a compliment.
Because at 2050,
with the oldest state capital in the country,
we look damn good for our age.

Compared to their Dow Jones Average
we finally appear exceptional,
breaking the curve
one border at a time.

36 years from here,
New Mexico will still be exotic to others
and enchanting to us.

We’ll still be inventing
New names to call ourselves.
Still be creating new races
each and every monsoon season

of love.

New Mexico will always be magic,
Like a horizon-taut canvas
making something out of nothing.
Pulling a rabbit out of the mesa,
waiting for a sign

with both ears to the sky.

Nothing under its sleeve
but sacred heart ink.
Acequia Sangre underneath
its adobe-flavored skin.
Hungry for the snowpack
to finally shed a tear.

As the highways grow
wider and western than the Rio.
As the river banks
collapse like a recession
in vein.

As the scales of justice
leverage us out of poverty
instead of shackling us to it.

As the education system
weights opportunity
over place of worth.

As the sites
become more sacred,
and the sacred
Become more scarce.

New Mexico will endure,
evolve and enchant,
As it has always done.
Under many different names…

and flags.

But what will come
of Nuevomexicanos?

The Catalonian culture and language have endured against the odds throughout centuries of oppression. The Catalan language, just 120 years ago, was unmodernized, undocumented, disorganized, and at risk of being lost to history like many Iberian languages before it, and the rise of Franco in 1939 should have been the end of the language, yet it endured.

Unlike what’s happened to Traditional New Mexican Spanish - the Spanish dialect spoken only in Northern New Mexico and Southern Colorado - or the Native languages around before that. New Mexican Spanish is the dialect many of my ancestors on my father’s side must have spoken over the last several hundred years.

Like other Hispanos who grew up in the mid-1900s, my grandpa was beaten by the white teachers at school if he spoke in his native tongue. He eventually learned English, and when he had kids, he and my grandmother did not teach my father Spanish. Most younger and middle-aged New Mexicans with roots in New Mexico share the same story today.

To combat this cultural loss, I’ve argued before that the State of New Mexico should adopt more bilingual schools. This would give New Mexico some of its cultural heritage back, and likely increase the effectiveness of our education system, boost our economy, and more. For more on that, you can read one of my first blog posts about it here:

Similar types of cultural oppression, and then revival, happened in Catalonia. Let’s go back 140 years to Catalonia before Franco - when the Catalan language was disorderly, and the people who spoke it couldn’t garner it well enough to use it practically in all cases.

Pompeu Fabra (1868-1948), the Catalonian engineer for whom Universitat de Pompeu Fabra is named (and the school I am currently attending through the associated Barcelona School of Economics), took a keen interest in fixing the problems within his native tongue. He spoke Catalan, as one does when they grow up in Catalonia, but he realized that his language was disorderly and in a state of misuse. According to the Universitat de Pompeu Fabra website:

He was a diligent student who excelled in mathematics and, following this path, over the years he studied industrial engineering. His vocation, however, was another: the study of Catalan and its normalisation. He said that he discovered this one day when he was preparing to write a letter to his nephews and realised that he barely mastered the language he spoke. From then on, the meticulous engineer passionately dedicated himself to the study of Catalan in order to rescue it from its disuse and bring it up to date.

I’m not a linguist, so I cannot adequately explain how Fabra managed to reorganize Catalan in a way that made it more practical and modernized, but the Spanish Royal Academy of History notes:

[Fabra] directed a "linguistic campaign" (1890-1892) that was the beginning of the renewal and modernization of standard Catalan… he published Ensayo de gramática de catalán moderno (1891), a… work… whose methodology and objectives are revolutionary: he does not write, like others, a theoretical treatise (full of notions and classifications) and in line with the habits of such works (based on some tradition of written language or on routines that are transmitted from one author to another), but rather aims to describe the real language spoken in Barcelona.

And Irene Boada, a Catalonian lecturer, noted in an article for The Conversation:

After the Spanish Civil War ended in 1939, the repression was not only political but cultural too. Catalan institutions were suppressed and Catalan was banned in the school system. Indicative of the new political order were statements from the authorities, the police in particular, such as “Hable el idioma del imperio”: use the language of the empire.

Fabra was a Catalonian nationalist. He believed that Catalonia ought to be sovereign as it once was. So when Spanish nationalist Francisco Franco assumed dictatorial power after his nationalist army won the Spanish Civil War in 1939, he made it impossible for cultural threats like Fabra to live in Spain safely. Fabra fled to France, in exile, where he lived the rest of his days.

Boada notes:

Attempts to suppress the Catalan language and culture have deep historical roots but were intensified during the era of Francisco Franco. The dictator banned the Catalan language from public spaces and made Spanish the sole language of public life.

For 40 years under the dictatorship, Spain tried to present itself as an ethnically and politically homogeneous state. The execution of Franco’s opponents continued after the end of the Spanish Civil War. One prominent victim was the former Catalan president, Lluís Companys who was deported from Nazi-occupied France in 1940 and then executed in Barcelona…

With the death of Franco in 1975, and once democratic freedoms had been recovered, the 1978 constitution recognised linguistic plurality and established that Spanish languages other than Castilian could be official languages of the state. Catalan is now compulsory in Catalonian schools.

Now, there are likely thousands of historical examples of cultural devastation that are similar to what happened in Catalonia. But not all of them have the sort of happy ending of cultural rebirth that Catalonia has experienced since the death of Franco. New Mexico’s loss of language is not a perfect equivalent to Catalonia, but there are some similarities.

Mary Beth King of the University of New Mexico Newsroom notes:

In 1907, President Teddy Roosevelt expressed his conviction that “We have room for but one flag, the American flag ... We have room for but one language here, and that is the English language ... and we have room for but one sole loyalty and that is a loyalty to the American people,” an ideology that intensified feelings that non-English languages were unpatriotic.

New Mexico becoming a state in 1912 was a bittersweet victory for New Mexico. Suddenly, New Mexicans were faced with English as a central language in education and were paying taxes to fund schools that stigmatized the only language they could speak.

Wilson notes:

Many educators and speakers of the prestige varieties viewed New Mexico Spanish as archaic, rural, full of errors, and in need of remediation, and attempted to eradicate elements of the dialect in an attempt to teach us how to speak correctly.

New Mexican Spanish evolved through years of isolation. It was confined to the practical situations its speakers found themselves in - mostly spoken around the house, the farm, and with other speakers locally. Most speakers of the dialect were not writers, intellectuals, or scientists who could help cement the dialect in any form of organized way. There was no New Mexican Pompeu Fabra. So now, even if we wanted to resurrect the dialect, we likely wouldn’t succeed at getting it down perfectly. Too many of its users have died without passing the dialect on to their children, and there are few historical examples of the dialect in written or spoken form on record for us to replicate.

I’ve managed to learn a little Spanish from my grandparents, and I hope to learn a little Catalan while I’m in Spain over the next year. Maybe it’s not as important to you, but I’ll leave you with some New Mexican Spanish that, perhaps, you could remember - to help restore a small part of New Mexican culture, which will likely not have the same comeback as Catalan but should be remembered nonetheless.

From the UNM Newsroom:

No je instead of No sé (“I don’t know.”).

Lonche, an Anglicism for “lunch.”

Ratón volador (flying mouse) for “bat” instead of murciélago.

Gallina de la sierra (mountain chicken) for “turkey” instead of pavo or guajalote.

Troca or troque for “truck.”

Muncho instead of mucho (“lots” or “much”).

Dende instead of desde (since”).

My dad, before and since his untimely passing last year, has been a source of motivation for me. Growing up, I often found Post-it notes stuck to my bathroom mirror with quotes from historical greats, written in my dad’s neat handwriting. Quotes like:

“What you’re thinking is what you’re becoming” - Muhammad Ali

“Continuous effort - not strength or intelligence - is the key to unlocking our potential.” - Winston Churchill

“You have power over your mind - not outside events. Realize this and you will find strength.” Marcus Aurelius

I think I used to find these corny, but their timeliness helped them stick in my head. They would always show up on my mirror the day before a big cross country meet, or if he could tell I was struggling through something. Corny or not, I would leave it on my mirror for a while, then retire it to the book where I stored the rest of my dad’s favorite quotes.

The reason I bring this up is because there’s one Post-it note in particular that’s been on my mind lately:

This quote has given me peace of mind as I rationalize quitting my job at the New Mexico Finance Authority (my last day was August 2nd) as I prep to spend a year “sharpening my saw” in graduate school.

Yesterday I landed in Barcelona, Spain where I’ll study for the next year at the Barcelona School of Economics (BSE). In a few days, I’ll start the Economics of Energy, Climate Change, and Sustainability (ECCS) Master’s program. I’m incredibly excited (and nervous) as BSE was recently ranked the 9th best economics research institute in the world, and there’s a great lineup of professors set to provide a rigorous academic experience.

I chose BSE not just for its reputation as a top-ranked research institute, but because I can immerse myself in the Spanish language and experience Barcelona urbanism. Plus, master’s programs in Europe are less expensive than in the US. It ticks a lot of boxes for me.

I’m sad I’ll be outside New Mexico for a year, but I’m excited to return with a sharpened saw in 11-12 months. And I plan to share my educational and cultural experiences with you via Complex Effects along the way.

The program starts with a few brush-up courses on coding, mathematics, and statistics - and then proceeds with three terms of economics, finance, and data analysis classes - many of the classes geared toward climate change. Here are a few classes I’m especially excited about:

• Macroeconomics Under Climate Change

• Empirical Analysis for the Analysis of the Energy Transition

• Sustainable Finance

• Competition and Regulation in Energy Markets

• Economic Geography and Climate Change

During the third and final term, I’ll apply my new knowledge to a capstone project in which I hope to focus on New Mexico. I have a few ideas for this already, but if you have any good New Mexico-focused ideas for my capstone project, leave them in the comments or email me at aanaya@complexeffects.com.

I’d like to thank the New Mexico Finance Authority for giving me a fantastic place to work over the past couple of years. My colleagues were brilliant, the work was rewarding, and I learned more about the Land of Enchantment than I could’ve imagined. If you ever get the chance to work for NMFA, take it.

It’s an exciting time for me and this blog, and I’m grateful to all my subscribers who continue to support me. Time to sharpen up.

P.S. Send green chile!

This is just a quick reminder that the New Mexico Environment Department (NMED) is putting on a ‘Rapid Hire Event’ this weekend - Friday, August 23rd, and Saturday, August 24th at EXPO New Mexico in Albuquerque, NM.

NMED is one of the most consequential departments at the state level. They work to keep oil and gas operators in check, help bring clean water to New Mexicans, fight to reduce climate-changing emissions in transportation, and so much more.

Where: EXPO New Mexico | Manuel Lujan A 300 San Pedro Dr. NE, Albuquerque, NM 87108 - Parking: Enter through the San Pedro Entrance. Inform attendants you are onsite for the Rapid Hire!

When: Friday, August 23, 2024, 10AM-5PM Saturday, August 24, 2024, 10AM-3PM

What to Bring: two resumes; three references including names, phone numbers, and emails; and unofficial educational transcripts for your highest education level achieved.

The Jobs: 60+ jobs are up for grabs.

The Climate Change Bureau is hiring an environmental scientist, a program coordinator for clean hydrogen, a management analyst working to reduce emissions statewide, and more.

The Air Quality Bureau is seeking environmental scientists, managers, and more.

The Secretary’s Office needs a hiring and recruitment specialist.

The Financial Services Bureau needs an accountant.

The Office of General Counsel needs an attorney.

The list goes on.

Chances are high that there is a job there for you. Complex Effects readers are likely the most environmentally conscious people in the State of New Mexico, so I wanted to make sure I highlighted the importance of having a fully staffed, highly capable NMED. The Environment Department is full of great people working to make New Mexico a safer, healthier, and climate-conscious state.

The Climate Change Bureau, for example, is led by none other than Claudia Borchert. Claudia is my former boss and quite possibly the smartest person working on climate in the State of New Mexico. Michelle Miano, Director of the Environmental Protection Division, is an experienced environmental law specialist with an optimistic and motivating presence - if you work with her, you’re bound to accomplish great things for New Mexico’s Environment. And of course, there’s Secretary James Kenney. Secretary Kenney lives and breathes for New Mexico, and anyone who works with him can tell he’s the real deal.

Anyway, don’t just take my word for it. If you’re looking for a career change into something more meaningful, go meet the crew at the New Mexico Environment Department and see for yourself.

You can find the full list of job summaries here.

While politicians celebrate Maxeon’s plans to build a $1 billion solar cell manufacturing facility in Albuquerque, I have serious doubts.

The proposed 160-acre, 3-gigawatt (GW) solar cell and panel manufacturing facility expects to create 1,800 highly skilled jobs in Albuquerque. It’s supposed to diversify New Mexico’s economy and put Albuquerque on the map for domestic solar manufacturing. For reference, the US’s solar panel manufacturing capacity is currently at 27 GW/year - so a 3 GW factory is a big deal.

Local and State politicians have touted their ability to attract Maxeon with quick permitting times, tax incentives, state grants, and investments from federal programs like the Inflation Reduction Act. Upon announcing the project, Maxeon said they expect “to begin construction in the first quarter of 2024, with factory ramp-up to commence in 2025.” We’re now well into the third quarter of 2024 and I’m starting to seriously doubt Maxeon’s ability to come up with $1B. Recent legal issues, revenue losses, and a drop in stock price have me wondering how they might still pull this off.

In their press release a year ago, Maxeon stated the following:

[The project] is subject to a successful financial close under the U.S. Department of Energy's ("DOE") Title 17 Clean Energy Financing Program. Maxeon is currently in the due diligence stage of its loan application and site selection is an important milestone in completing this process with DOE's Loan Programs Office. DOE's invitation into the due diligence and term sheet negotiation process is not an assurance that DOE will issue a loan guarantee, nor that the terms and conditions of a loan guarantee will align with terms proposed by the applicant.

Meanwhile, KUNM reported in May of this year that Maxeon’s timeline is slipping:

They said that surveys, geotechnical investigation, permit reviews and a construction air permit had been completed, and that pending the closing of financing the company plans to break ground in the second half of 2024.

Maxeon is trying to come up with a billion dollars to build the facility. To fund a project like this, a publicly traded corporation like Maxeon might raise equity, use existing cash, or borrow money from someone else.

Maxeon stated they’ve been eyeing the Title 17 Clean Energy Financing Program (Title 17) at the Department of Energy’s Loan Programs Office. This program, like many other government loan and grant programs, is meant to help finance projects that are too risky for private banks but offer societal benefits and help develop immature industries or supply chains in the US. Unfortunately for Maxeon, this doesn’t mean the DOE is willing to hand them a billion dollars no-questions-asked.

According to the Title 17 eligibility criteria, proposed projects need to have a “Reasonable Prospect of Repayment.” In other words, Maxeon needs to prove they either already have the cash flow to repay the loan or will once the proposed project is complete. And if you look at Maxeon’s financial statements, it quickly becomes clear that their creditworthiness is questionable.

Sales revenues have dropped significantly since Q4 2023 while expenses have not. One vital financial measure that credit analysts look at while considering investing in a company or offering them a loan is EBITDA (Earnings Before Interest, Taxes, Debt, and Amortization). EBITDA represents the cash profit generated by a company’s operations. Maxeon’s EBITDA since its inception are as follows:

2020: -$46,500,000

2021: -$168,715,000

2022: -$138,798,000

2023: -$175,208,000

Q1 2024: -$58,889,000

Maxeon is plagued by huge losses every year, and it’s only getting worse. Part of their issue is that they build some of the best, yet costly, solar cells on the market. They have not found a way to lower the cost of making great solar panels, and inflation has strained the entire solar industry over the last couple of years - with many solar manufacturers now seeing red on their income statements. If I were a loan officer working in DOE’s Title 17 office, I would have trouble overlooking this poor performance.

Furthermore, high interest rates magnify the issue. Reuters’ recent solar industry analysis states that “[solar] suppliers that are already “well-known and bankable" in the U.S. are expanding, other aspiring manufacturers have delayed factory projects because of oversupply...” High interest rates don’t just make it hard to build factories - they deter would-be solar panel buyers from installing solar arrays or rooftop solar, which affects Maxeon’s bottom line and therefore investor sentiment.

This brings us to Maxeon’s stock. Since they announced the Mesa del Sol factory location, Maxeon’s stock price has taken a nose dive and is at an all-time low:

Maxeon’s market cap, or the total value of the stock Maxeon investors own, is just $76 million as of August 15th, 2024 (the ‘Mkt cap’ estimate from Google above is incorrect). In other words, the market thinks Maxeon is worth $76M. When Maxeon announced the Albuquerque factory last summer, the company was worth a little over $1B, which made a $1B factory seem a bit more feasible.

To say investor sentiment is low would be an understatement. Maxeon stock is down over 99% from a year ago. The stock saw a small bump when President Biden announced a 50% tariff on Chinese solar cells and panels this past May, but that wasn’t enough to outweigh the company’s underlying issues as the stock price drifted back down soon after. To make matters worse, recent lawsuits against Maxeon headline the company’s current issues.

The Rosen Law Firm, one of the firms filing a class action lawsuit against Maxeon on behalf of Maxeon investors stated the following:

[Maxeon] made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically… (1) that Maxeon relied on the exclusive sales of certain products to SunPower; (2) that, following the termination of the Master Supply Agreement, the Company was unable to “aggressively ramp sales”; (3) that, as a result, revenue substantially declined; (4) that, as a result, the Company suffered a “serious cash flow” crisis; and (5) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

In other words, Maxeon lost their biggest client (SunPower) earlier this year and wasn’t completely transparent with their investors about how serious an issue this was for their cash flow. To make matters worse, Maxeon delayed posting their quarterly financial statements, getting them in trouble with the FTC. Lawsuits aside, it seems as though financial losses are expected to increase for the foreseeable future.

On the bright side, the company saw a $200M cash injection immediately following the lawsuit meant to help them get back on their feet. According to the Albuquerque Journal, “TCL Zhonghuan Renewable Energy Technology Co. Ltd., TZE, Maxeon’s largest shareholder which is based in China, agreed to invest $97.5 million via a debt investment and an additional $100 million equity investment, Maxeon announced Thursday.”

The company hopes this cash injection will help them return to profitability, but it will also increase their total outstanding debt to nearly $550M - making them more risky to lenders - and that cash likely won’t be available to help fund the factory.

According to the Journal, Maxeon expects millions of dollars of investments from the State of New Mexico over the coming decade including $20M of Local Economic Development Act grants, rebates on gross receipts taxes for construction, and hundreds of millions of dollars of industrial revenue bonds (IRBs).

A majority of the funding is supposed to be IRBs. IRBs are essentially debt instruments issued by a local governmental entity (to bond investors) and repaid by the project owner (Maxeon) - so it’s not really government funding, but debt funds made possible by the government. And unfortunately for Maxeon, IRBs are no easier to get than any other type of debt. Maxeon will still need to prove its creditworthiness, and for all the reasons I’ve already mentioned, that’s becoming increasingly difficult for Maxeon to do.

Now, while I have serious doubts as to whether Maxeon will pull this off, they have not yet stated that the $1B Albuquerque factory will not be built. Perhaps the corporate suits at Maxeon are working on some promising financing schemes behind the scenes, or maybe TZE’s cash injection will help get Maxeon to profitability. But the credit analyst in me sees a company with legal issues that probably can’t get a loan, can’t attract investors, has dwindling sales, and doesn’t have the cash to build a $1B manufacturing facility in Mesa del Sol. Hopefully, they prove me wrong.

I was honored to be part of the first Strong Towns Albuquerque Leadership Team. The pro-housing, pro-transit group quickly became the largest Strong Towns chapter in the nation (so I’m told) as we organized some of the local energy for change - giving the issue a louder voice than it has ever had in the Duke City. I can’t believe how many people have turned out for the Strong Towns meetings.

One of the coolest moments was when Ray Delahanty, creator of the popular YouTube channel City Nerd, agreed to do a live Q&A with Strong Towns ABQ. In preparation for the event in Albuquerque this past May, I got to have a couple of beers with the City Nerd himself to plan the event. I asked him if he too thought YIMBY energy was building, or if that was just in my head. His answer was “Yeah. Definitely.”

Now it’s August, and it’s become more obvious that energy around the US is growing for things like public transit and housing density. The most recent YIMBY energy is coming from the highest level of government: The Harris-Walz presidential ticket. Kamala Harris’ new VP running mate has been elevated from an unknown Midwestern State Governor to a wildly popular Democratic VP nominee. If you’ve been reading the news, you’ve likely heard about his policies on free school lunches and marijuana legalization. But the housing policies Minnesota passed under Walz’s watch are the most impressive to me given how strong opposition seems for similar policies at the local level here in Albuquerque.

State-level Democrats in Minnesota have accomplished pro-housing policies that every urbanist wishes their local City Council would pass. Recent Minnesota laws legalized higher-density housing in cities and cheaper-to-build housing structures that are largely prohibited across the US. These tweets about summarize what Walz stands for in terms of housing, transit, clean energy, and more:

As a result, Minnesotan cities have seen more stable rent prices, huge investments in transit (including trains), and more clean energy projects. YIMBYs across America can’t believe their luck as Harris-Walz might be the most ‘Yes In My Backyard’ ticket in the US ever. In response, people are organizing.

YIMBYs for Harris is a group organizing a call on August 28th to “celebrate the pro-housing record of the Harris-Walz ticket, raise money, and recruit volunteers for the campaign…” (Sign-up link here)

Train Lovers for Harriz/Walz is another group organizing a call on August 15th “for train lovers, bikers, walkers, rollers, riders, workers, etc. to support the Harris/Walz campaign!” (Sign-up link here)

States across the US are following suit as bipartisan efforts in California, Colorado, Montana, Massachusetts, and more are adopting similar laws to Minnesota that alleviate housing prices.

Even the State of New Mexico has gotten into the zoning reform action, albeit so far in a small way. During the 2024 legislative session, the New Mexican Legislature and Governor signed into law the Housing Development Fund - a revolving loan fund housed at the New Mexico Finance Authority (NMFA) that aims to finance affordable housing projects across the state. NMFA’s new policies for the program note the prioritization of projects in cities that undergo zoning reforms. Still, it’s unclear whether NMFA’s below-market interest rates will induce enough zoning reform to make a large dent in the 32,000-unit housing shortage New Mexico has. Either way, one loan fund can’t completely fix New Mexico’s housing crisis. But it appears this is just the beginning for New Mexico’s Governor, Michelle Lujan-Grisham.

Also during the 2024 legislative session, the NM legislature followed Lujan-Grisham’s desires and created the state’s first Office for Housing. According to a press release from the Governor’s office, the new housing office “aims to improve housing availability and affordability across the state, and… is now accepting applications for the team that will tackle these issues, including the position of Director of Statewide Homelessness Initiatives.”

The new housing office hasn’t given explicit examples of deregulating policies they might fight for, but the office’s job postings mention efforts to “[close] the 30,000+ unit statewide housing deficit,” and “[lower] regulatory barriers to creating new housing…” If you’re interested and qualified, apply to work for the Office for Housing team here and here.

Now, while Strong Towns-esque policy reforms are becoming more popular at state and federal levels, many local-level efforts to legalize housing still fall short. Albuquerque, for example, recently considered a very minor zoning change that would have legalized building duplexes in key transportation corridors and city centers around the city but was turned down by the City Council. In response, I wouldn’t be surprised if local housing advocates, like Strong Towns ABQ, turn to State-level leaders to help increase the housing stock in New Mexico - as Tim Walz and Minnesota did.

Media outlets have left me feeling down and overwhelmed with ecological and societal doom as of late. Between NIMBY City Council members blocking affordable housing in Albuquerque, fires and floods in New Mexico, the US Supreme Court clawing back environmental and democratic protections, devastating wars in Ukraine and Palestine, and a US Presidential election that has the whole world on edge, it’s easy to overlook the good news stories.

Let’s take a few minutes to focus on some good news internationally, in the US, and, since 87% of my followers are in New Mexico, I’ll touch on some local wins as well.

International good news

Britain’s Labour Party wins big

Yesterday, Britain’s left-leaning Labour Party ended the Conservative Party’s 14-year stint controlling the UK. Keir Starmer will be Britain’s next prime minister as her party secured a comfortable majority in parliament:

The Labour Party aims to, among other things, repair international relationships and “Make Britain a clean energy superpower.” Unlike the degrowth climate advocates in much of Europe and the conservative parties everywhere, the Labour Party sees, “that economic growth, energy security, lower bills, and addressing climate change can be complementary.”

Whatever your politics might be, the Labour Party’s success is an objective win for the climate. Great Britain was the birthplace of the Industrial Revolution, which kicked off a global economic boom like the world has never seen, and the country has been one of the major emitters of climate-changing emissions since. While the country’s economic might is today overshadowed by the likes of the US, China, Germany, Japan, and India, Britain still holds an important role in creating a framework for balancing economic prosperity with environmental obligations.

If the Labour Party succeeds in offering an alternative to degrowth (the misled environmental philosophy calling for a smaller economy in exchange for fewer emissions), they could encourage other European countries to follow suit with pro-growth and pro-climate policies.

Renewables reached 30% of electricity generated in 2023

Last month, the AP reported that “For the first time, 30% of electricity produced worldwide was from clean energy sources as the number of solar and wind farms continued to grow fast.”

The AP’s report also showed that hydropower, the long-time dominant renewable energy, saw a drop in 2023 due to flooding in India, China, and North America. As climate catastrophes disrupt the economy, it will be important to diversify our energy mix, and it appears that the world is doing so.

National good news

More US cities are adopting efficient land use policies

According to the Parking Reform Network, a non-profit that educates the public on parking policy and reform, 69 cities in the US have eliminated parking mandates, a number that’s grown drastically since 2020. Parking lot mandates create unwalkable neighborhoods, drive up housing prices, and leave cities with large swaths of underutilized land.

Thanks to organizations like the Parking Reform Network and Strong Towns, cities are learning how vehicle storage can negatively affect urban life. Car-centric urban design often feels too deeply ingrained in American culture, and the amount of work ahead of us can feel daunting, but it’s clear that energy is building for change. American cities were built for cars, but 69 of them have taken meaningful steps to reverse that wrong.

American pandemic recovery is hard to deny

This topic may deserve its own post soon, but it’s important to quickly note that the US is emerging from the pandemic much stronger than any other country, and much stronger than many people realize. The pandemic affected everything from the US stock market to high school graduation rates, but today, things are looking pretty good. Here are some of the meaningful metrics that are improving:

• Americans are starting to feel better about the economy as inflation eases.

• The stock market continues to break records amid favorable inflation data.

• US job and wage growth numbers are slowing, but are still strong - suggesting the Fed is still on track for a “soft landing.”

• Despite growing concern about crime stats in the US as the Presidential election nears, the stats show crime is down nationwide.

• HS graduation rates are the highest ever, surpassing pre-pandemic levels.

• Teen use of tobacco and e-cigarette products is down.

So, on paper, the US is doing extremely well. Off paper, the vibes are weird, to say the least, but you can ignore much of the negative vibes meant to distract and scare you into making a rash decision on election day.

New Mexico good news

Abq’s Louisiana Boulevard is getting a Vision Zero makeover

Construction started on one of Albuquerque’s deadliest stroads, Louisiana Blvd. The street is set to receive the city’s first protected bike lane, more transit options, and traffic-calming infrastructure as the City works to decrease pedestrian fatalities and injuries in the US’s most dangerous city for pedestrians. By implementing this project, hundreds of homes and shops will become more accessible - improving transit equity, and public health, and decreasing climate-changing emissions.

According to KRQE news, “The $1 million project is scheduled to last 45 days and is the first major project to be paid for through funds generated from the Automated Speed Enforcement program.”

New Mexico legislators set to receive full-time aides

New Mexico’s legislative council approved a measure on June 24th allowing state legislators to hire full-time staff. New Mexico’s legislature is the only volunteer state legislature in the nation - meaning they don’t receive a salary, non-senior members don’t have staff, and they lack office space in their respective districts.

Rep. Susan Herrera told KOB, “What we’re asking for is to have the paid Legislature to have a longer session and to have staff. So this is the first time we’ve ever been able to kind of break that barrier. And the Legislature voted for us for the first time in our entire history to have staff for the New Mexico State legislators.”

Increasing the resources available to state lawmakers enables them to make more informed decisions and interact with their constituents more. This is a small step towards fully modernizing the New Mexico Legislature - improving the function of our state government and democracy.

For more on the importance of modernizing New Mexico’s legislature:

Thanks for reading the 3rd installment of Good News, New Mexico. Hopefully, you can reflect on these positives and go about your day a little happier than before.

Attention readers - Ruidoso, New Mexico has been experiencing devastating wildfires and floods that have caused irreparable and costly damages. The fires (around 85% contained to date) were said to be started by lightning. Two people have been killed, and 1,400 structures destroyed.

If you have the means, one way you can take action today is to donate to the Community Foundation of Southern New Mexico - one of the organizations helping those afflicted by the fires and floods in and around Ruidoso. To donate, click the link below:

Impact Fund for Lincoln & Otero County (Link)

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