Year: 2010

Geothermal energy in Ireland

GT Energy has applied for permission for a deep geothermal power plant in South Dublin. This has attracted some media attention (here, here, here) and Paul Cunningham cast me in my standard naysayer/party-pooper role.

The media attention is overblown. The project is small. It is only an application for planning permission. The legal framework for exploiting these resources has yet to be designed. Subsidies for geothermal power are zero at present.

The cost of geothermal energy depends, to a large extent, on the depth of the hole that needs to be drilled to get to the heat below our feet. In Iceland, Mother Nature nicely brings the hot water to the surface. GT Energy plans to drill 4 kilometers deep in South Dublin.

Unfortunately, Ireland is at a geological disadvantage in this regard (although mercifully free of volcanoes by the same token). As shown on this map (peer-reviewed version here, but in B&W and behind a pay wall), you’d need to drill deeper in Ireland than elsewhere in Europe to get to the hot stuff.

Therefore, if GT Energy can get this to work at a profit in Ireland, they’d be best advised to apply the technology elsewhere and make buckets of money. I will not invest in their company, but others are free to try their luck.

Peter Sutherland on the Irish Economy

The text of Peter Sutherland’s speech to the Institute of Directors is below:

Notwithstanding the successful auction of €1.5bn of government debt on Tuesday, there is no doubt that in recent weeks (and in particular in the last two weeks), Ireland’s position in the debt markets has deteriorated markedly and the sale came at a high cost. This has been the consequence of a number of factors. Some of these are objective facts about the dire state of our public finances. Others are the result of market perceptions. It is hardly surprising at present that there is an air of fatalism consistently nurtured by negativism but it is surely not in our character to give in to this. We can and will get out of this mess if we have the will to do so.

Let me say a word first about market perceptions. We seem to have a remarkable capacity to damage our public image abroad. The prevailing and understandable sense of depression in Ireland is made worse by a media often seemingly intent on presenting the worst perspective on current events. The recent Barclay’s analyst report, which was wrongly presented by some in the Irish press as being far more negative than it actually was, is a case in point. You may say, “Well so what? Those professionally concerned with our credit worthiness surely do not decide their approaches on the basis of second hand commentary on an analysts report?” Well, yes and no. The national media reaction is taken seriously and market reactions are often instantaneous.

It is time that we separated two big issues, the underlying budget deficit and the bank crisis. The first of these presents a very challenging issue but it can be dealt with if we have the collective will to do so. The collective will can only result from an understanding of the facts. We are running a revenue to spending gap of circa €20 billion p.a. and simply cannot continue to do so. As Willem Buiter, formerly of the London School of Economics, said this week, the cost of borrowing is becoming unsustainable. Our national debt is accumulating still at an alarming rate as a result of government spending but is being obscured as an issue in public debate by the constant and intense focus on the nature and effects of the banking crisis. Terrible though these are, they are identifiable and should be considered separately.

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Clouds Over Dublin Soon To Break Up

This is the view of Michael Vaknin of Goldman Sachs Global ECS Markets Research:

Irish bonds have substantially underperformed the rest of EMU periphery.
A heavy pipeline of Irish bank debt rolling off soon brings back memories of the Greek turmoil.
But we believe risks are overpriced, as several backstops are in place:
The banks can increase funding through the ECB liquidity programs.
And the ECB could intervene again in ‘dysfunctional’ sovereign markets.
More fundamentally, we argue that Ireland’s issue is liquidity, not solvency…
…Hence if the EFSF is activated, spreads would likely fall significantly.
Watch for signs of ECB intervention and banks’ reduced issuance to cement the case for ‘long’ Ireland.

Do Academics Only Work 15 Hours a Week?

This is a touch on the navel-gazing side but, at the same time, since everyone seems to agree that having high-quality universities is an important element in future economic growth, it seems worthwhile explaining how academics actually work.

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Heckman Policy Website

James Heckman’s work on human capital investment has been prolific over the last number of years and has major implications for a wide range of policy areas. His papers are rarely easy reading, drawing from detailed structural econometric models that he has developed over several years with colleagues. A new website outlines his basic ideas in short and accessible videos and documents (h/t Colm Harmon who is one of a number of colleagues in UCD working on this area in Ireland). This is as close as it gets to a clear answer to a major question in Economics and is essential for any policy people who read this blog across fields such as health, education, social policy, criminal justice and a range of other fields. Heckman has emphasised rigorously designed and evaluated early childhood interventions that promote a broad range of skills and personal development.