Eleanor Denny writes on Ireland’s energy situation in today’s contribution to the series on the Irish economy: you can read it here.
Eleanor Denny writes on Ireland’s energy situation in today’s contribution to the series on the Irish economy: you can read it here.
71 replies on “Irish Energy Economics”
I’m glad some people who influence policy have noticed this. We have huge resources for energy generation, we just need to start using them. And I suspect the cost of oil will only keep rising.
And while nuclear power might have benefits, I’m afraid I can’t trust an Irish gov’t to properly regulate the planning, construction or operation of one. Off-shore windfarms might be within their abilities. And perhaps eventually they’ll be competent enough to regulate banks.
It would be unfair and unwise to perform a detailed critical assessment of a short op-ed piece of this nature on such a huge and complex topic; and sub-editors can be totally ignorant butchers. But it is legitimate to assess it briefly in the context of the key known themes of government energy policy. These comprise:
1. The energy semi-states must be protected and fostered at all costs and their performance justified and defended;
2. Every effort must be made to dismiss the benefits of nuclear generated electricity either now or in the future;
3. Every argument must be deployed – whether relevant or not – to advance and promote renewable energy (even if wind generation is generally recognised as the most expensive CO2 reduction technology)
4. The general public must be softened up to encourage them to continue paying excessive and increasing electricity and gas prices; and
5. Any case made that questions these four themes and suggests viable alternatives and combinations, irrespective of how solidly based it may be in theory and practice, must be dismissed, rejected or ignored. (And, for goodness sake, whatever you do, never engage or debate directly with those who question the previous four articles of faith.)
This op-ed scores very highly on these five criteria. But this should not be a source of surprise:
“The Electricity Research Centre (ERC) is an industry-university research collaboration with research driven by the energy industry worldwide and a particular emphasis on the Irish electricity sector. The ERC is based in Electrical Engineering at University College Dublin (UCD) with an Energy Economics branch at Trinity College Dublin (TCD) .
The ERC is governed by a board chaired by Mr. Michael Tutty, Chair of the Commission for Energy Regulation, and made up of the industry members and representatives from the Department of Communications Energy and Natural Resources, the Economic and Social Research Institute (ESRI) and Sustainable Energy Authority of Ireland (SEAI).”
@ Paul Hunt Your post is better than the article – by a mile.
@PH: “2. Every effort must be made to dismiss the benefits of nuclear generated electricity either now or in the future;”
Hi, Paul!. Benefits of nuclear? I know that small, compact reactors are lowish hazard and easy to operate and maintain. The problems with their radioactive waste is thereby diminished – but not abolished. If this is the nuclear you are referring to, then I concur. But, large-scale reactors are a definite no-no.
The only path to ‘sustainability’ (a very much abused and misunderstood term) is to pro-actively reduce our electricity use. That’s it. Higher prices for electrons? Yep, absolutely. But, sure on our steadily decreasing incomes we will be fine! 8)
I attended a short symposium on energy in TCD a few months back. Ostrich, head-in-sand stuff. Generals in armchairs in their club plotting their Big Push – for the last war! Not encouraging.
Of course you lot think the post is better than the article. Some people will always want to believe that things are expensive not because they want them so much, but because evil people are making them expensive, and the solution to this economic problem (like many social problems) is to banish the evil people.
I have no hard or fast views on nuclear; I simply don’t know enough about it or how the future will unfold. All I’m arguing for is that any decisions are based on facts, evidence, analysis and, then, a reasoned judgement – and not on prejudice, fear, ignorance and superstition. In any event, it’s a long way down the road if it were to make the remotest sense in an Irish context. We have more than enough policy and regulatory dysfunction to address in the meantime.
My focus is on the formulation, scrutiny, amendment, enactment, implementation and review of energy policy. I’m much more concerned with the process than with the outcomes. In fact I would have no specific interest in the nature or mix of outcomes if the process were sound and took account of economic efficiency and the full economic costs (both internal and external) of any options considered. The problem now is that the outcomes are pre-determined (and damaging to the interests of consumers and the economy) and the process is retro-fitted to present the optical illusion that these outcomes have been generated by it in a completely independent and objective manner. And it baffles me – and to an extent angers me – that so many apparently sane, level-headed, intelligent people are fully signed up to this nonsense.
But what do you think the chances are that we’ll see some engagement here or elsewhere on these issues? Yeah. You guessed it. They will be conspicuous by their absence.
Experienced that sinking feeling when I read that article. The ‘vision’ of the status quo all the way. Your comment hits the spot, alright.
Lest anyone be under the impression that this is unique to Ireland or to the Irish energy sector, it occurs in all policy areas here, in the UK and thoughout the EU. This is an excerpt from George Yarrow’s Beesley Lecture in London this time last year “Where next for utility regulation?”:
“A few years ago, a colleague questioned a regulatory official about a claim that a particular decision would lead to several hundreds of millions of pounds worth of consumer benefits. The question was directed at how the number had been arrived at, since, prima facie, it looked a rather big effect from what might reasonably have been viewed as a relatively modest decision. The answer was not an account of the estimation methods adopted, but rather a statement that, of course, no-one in the agency believed that number – it was simply there for the Daily Mail et al.
That, I think, signifies a significant shift in the regulatory culture; which is consistent with a second episode when, sat in a meeting in SW1 dealing with regulatory issues, a young civil servant whispered “This is what it must have been like in the Soviet Union: everyone is going through the motions, but no-one believes.”
There is some comfort here in the fact that the officials concerned were aware of the distinction between (a) what was true and (b) what was going to be said in terms of the ‘line to take’; but I fear that, since those conversations, things have gotten worse in some parts of the system. Increasingly I come across regulatory officials who act as if there is no difference between truthful statements and the things being claimed in public statements about the benefits of regulation (which, being sometimes an order of magnitude or more higher than the relevant regulatory costs involved, can imply rates of return on public outlays several hundreds of percent higher than anything ever claimed by Bernie Madoff).
This doesn’t appear to be straight dishonesty: there is no indication of an overt intention to deceive. Rather, it appears to be the result of circumstances that have been most clearly analysed by Professor Harry Frankfurt of Princeton University, in his near perfect little essay On Bullshit. In Frankfurt’s view, bullshit is discourse or documentary material produced under conditions of indifference to truth.
This is a long way from hard headed intellectualism, and it is a particularly dangerous in regulatory affairs. Bullshit is, of course, a normal feature of democratic politics, and, in its proper place, can serve positive social functions. Some decisions are simply too hard to bear over-close contact with the truth5 – questions concerning allocation of scarce resources to some medical treatments provide examples – and a softening of the edges of potential conflicts can keep social systems on track. Regulators, however, are supposed to take hard, technical decisions that affect basic economic services, and indifference to the truth is a disturbing culture to find colonising some of the relevant policy structures.”
Professor Denny’s article is a summary of conventional wisdom on the subject of energy policy.
With 10% of electricity needs currently being met by wind power, we already have plenty of evidence on the impact of wind on fuel consumption.
The cracks are already starting to appear. Conventional wisdom says we ignore them and keep building.
If we place a nuclear plant on the Aughinish alumina site we can simultaneously reduce our electricity demand and also increase our diversity & security of supply as I guess Canada will not have a revolution anytime soon.
Also when all Moneypoints boilers are working it produces maybe 2 thirds of the electricity that a smallish nuclear plant could produce………..is this beyond our capabilities ? and is a base load of 20 -25% incompatible with a mainly wind gas setup ?
Are they really arguing for a 90% gas / wind structure with Peat & Hydro putting a pound of flesh on those bones.
Also if a dispersed existence is really unsustainable then the logic is you tax it out of existence – where is that debate I wonder ?
I don’t see the nuclear thing getting going to be honest – Europe’s strategic agenda is to deindustrialize the periphery and its coming along nicely.
We will stick to gas as it is superficially cheaper given its low start up capital costs ( effectivally scattering jet engines across the country ) but its running costs will become problematic in the long run.
Taxing cars off the road and promoting rail / bus commuter traffic is our low hanging fruit.
When or if this happens it will make the reopening of potential rail commutes such as New Ross to Waterford viable again.
It seems lost on our policey makers that a unbearably high Euro exchange value also dramatically distorts our transport economics making fuel and imported cars extremely cheap – why dramatic fiscal means has not been used to curb this malinvestment is beyond me.
A very interesting but sad PDF document on the closure of the Rosslare rail link , Goggle – [PDF] Waterford – Rosslare Europort route … – National Transport Authority.
Its study of rail economics – population / wealth / distribution in the region is worth a look.
The article does not tell us anything that is not known already, however it is a helpful reminder of the role of energy security.
I found the very last line of the article to be the most interesting…
“to ensure our security of energy supply it is an unfortunate truth that it will be necessary for the public to swallow some bitter infrastructural pills into the future”
What does “bitter infrastructural pills” mean in a physical sense? More wind turbines, more power lines, convert various valleys into huge reservoirs for massive hydro electric plants?
Or is it at statement of higher energy bills for domestic users? If that is the case then should it be “bitter financial pills”?
The absolute price of fossil fuels is not relevant. What matters is the relative price. Alternative energy sources are more capital intensive. The price of capital has increased rapidly too.
The price of gas is kept in check by shale.
Capital is internationally traded. Owners and lenders tend to be more intrusive than traders.
There is no love of variety for energy sources. What matters is the correlation structure of the inputs into the delivery of energy services. There is a strong correlation between the price of oil on the one hand and the prices of capital, steel and concrete (the three main inputs into a wind turbine) on the other.
There is no evidence that domestic energy sources are more more reliable than imported energy sources. In fact, Russian gas companies are considerably more reliable and predictable than Irish planners.
Imported energy costs less than domestic energy.
I wouldn’t get too bothered about the detail in this op-ed. As I pointed out, it is simply an academicised regurgitation of the established, dysfunctional energy policy. It won’t change anything; it is just another trowel of mortar to cement in the existing dysfunction.
The truly frightening thing is that it is the writer of this op-ed and her colleagues who are teaching the current generation of students. And we wonder why the country ambled sheep-like into the current economic and financial disaster.
And oh look. Philip has just posted on the good Governor’s opening remarks to the tribunes of the people. That should distract any of the ‘commenting contingent’ who might be looking here.
‘Imported energy costs less than domestic energy’
Do you have any papers on this Richard? Does the stetment account for the fact that a Irish engineers/farmers/companies are operating/maintaining/profiting/paying tax on Irish energy?
or of a ‘security of supply’ premium, as surely the potential to avoid price shocks or sustain ‘security of supply’ is worth something to a country.
@ Richard Tol
‘Imported energy costs less than domestic energy’
Do you have any papers on this Richard? Does the stetment account for the fact that a Irish engineers/farmers/companies are operating/maintaining/profiting/paying tax on Irish energy?
or of a ’security of supply’ premium, as surely the potential to avoid price shocks or sustain ’security of supply’ is worth something to a country.
When you import energy you export money – gas might be superficially cheaper as seen on a single companies accounts then lets say a peat power stations inputs but that bog standard money is far more sticky to a local economy.
Although admittedly it is no longer very trendy
“When you import energy you export money”
Is this really your argument? Why not prop up Irish car-makers, vineyards, banks (oops) etc? We’re part of a global market for energy, so trying to isolate ouselves and be self-sufficient in all things that cost money is extremely unrealistic and costly. Though I wasn’t about in the 50’s – when I believe we last tried to be self-sufficient – but I gather it was no pinic.
Importing raw energy is different from importing lets say consumer goods – there’s a equality to that trade relationship somehow.
However middle east oil imports is a totally different dynamic.
The power relationship lies completly outside our hands – in OPEC / Bank cartel meetings in Switzerland for example.
Such inequality in trade relationships drives destructive trade dynamics.
Also we need to export primary and manufactured goods to these areas and service the interest on bank cartels which are closely tied to this spigot.
The 100 year oil / dollar bubble is coming to a end – this will not be pretty , but avoiding the implications of this malinvestment disaster will only make the situation worse then it can be.
The best we can hope for is 1986 Eat the Peech depression with limited means but adequate life support but we need to prepare for a 1956 like situation.
@ PH: “And it baffles me – and to an extent angers me – that so many apparently sane, level-headed, intelligent people are fully signed up to this nonsense.”
I also have been ‘there’ Paul: about 26 years ago. Found the answer in a book -Integrating the Individual and the Organization (Argyris): its known as Skilled Incompetence. The infected individuals actually cannot ‘see’ the incongruity of their situation. And any attempt by anyone (except their boss of course) to alert them to the incongruity will elicit a significant hostile response. Basically, no-one does something that they ‘know’ is wrong. Hence they do what they are doing because they KNOW (with religious certitude) that it is right. So, “Would YOU kindly take YOUR criticism and shove it into a dark space!” Their primeval reaction is to spray the ad hominem, not interact in a meaningful intellectual manner with the substantive issue.
The question now resolves as to WHAT (in their cognitive makeup) allows them to behave in such a manner. It just might be the place of origin of their paycheck, or perhaps future paychecks! 8)
@All: Its the ENERGY cost of the ENERGY (ERoEI) that is the substantive issue here. Its has a little to do with money cost – which is more relevant to exploration and production issues. And, bye the bye – energy generation needs a mandatory, minimal input of liquid fossil fuel. And there is NO chemical substitute for that on this planet. Coal is good, but a tad more polluting. Like a big externality. Nat gas? Good luck on that one!
Seneca Effect anyone?
@ Pat Swords BE CEng FIChemE CEnv MIEMA
This must be a first!
I guess that we could all manage a jumble of letters after our names but a pertinent question: do you represent some vested interest?
Lawrence Crowley explains how things work in Ireland :
“You’d normally be hesitant to choose somebody you’d never heard of,” he said of the process of appointing new directors, adding that selecting the wrong person can mean “risking the cohesiveness of the board”.
Mr Crowley (74) sits on the board of Bord Gáis, as well as holding directorships in organisations such as Aer Lingus and the ESRI. He acted as governor of Bank of Ireland between 2000 and 2005 and previously had a long career in insolvency practice
Mr Crowley stopped short of accepting any responsibility for the banking crisis, arguing that Bank of Ireland was in good shape, with sound credit practices in place, when he retired.
I haven’t come across your source on organisational issues, but there is more than enough evidence and analysis available along those lines. Lots of established behavioural, cultural and social norms impact, but, on balance, it’s a ‘follow the money’ issue. Once within the ‘complex’, pay, promotion, consulting opportunities, research grants, etc. enforce compliance with the line being set at the top. I don’t really blame anyone who is enmeshed for failing to stand up and saying ‘this is bullshit’. It’s just that I would expect a bit more from the academics; but the increased reliance on external funding seems to be hog-tieing them even more than those on the payroll in industry and the government machine.
It all comes back to the public policy decision-making process. It’s completely back-to-front. Policy is decided on the basis of what can be sold politically or what is politically advantageous. The ‘party-line’ is established and spun and the hunt is on for evidence to support the policy decision. We might smile at the focus on ‘policy-based evidence’ as opposed to ‘evidence-based policy’, but this is the reality – and not only here, but throughout the EU. And there is no shortage of consulting firms aching to be well-rewarded to track down this evidence for the government machine.
All the FODAR have to do is to apply their efforts and resources behind the scenes when the policy decision is being made and, eventually, the desired legislation will emerge from the sausage-machine.
Nothing will change until parliamentary backbenchers realise that citizens have delegated their ultimate authority to them, that they should decide and that they have the numbers and responsibility to hold government to account. This would create the space and resources to expose government machinations to the scrutiny they require – and to retain those with knowledge and expertise to help apply this scrutiny.
But do you see any backbenchers with the guts and gumption to kick this off? No. I don’t either.
How are you measuring the cost of capital? Wind farms are built with private capital, not government debt. US corp bonds are at an all time low (BarCap index of US corp investment grade bonds was below 3.5% this month).
Hedging the future cost of fuel for the lifetime of a wind farm (say 25yrs) has a value which should be included in economic comparisons between renewable and fossil fuel power generation.
You make a good point that the capital inputs to a windfarm are correlated with the price of oil. Remember however that this is the price of oil at the time of construction rather than throughout the lifespan of the power station. Oil and gas are of course tightly correlated in price (although shale and LNG may start to shake that)
Nice paper on fossil fuel price correlation: ftp://ftp.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2006/reloilgaspri/reloilgaspri.pdf
As it’s friday, here’s a couple of entertaining documents released by Wikileaks today on the US view of Irish Energy Policy:
@PH: “It’s just that I would expect a bit more from the academics; …”
My experience of academics is that they are, by-and-large, Monorail thinkers. Know a lot about a little, but somewhat shallow about the wider contexts.
My intense irritation with so many self-appointed commentators and so-called experts is that I, as a complete financial and economic neophyte, could educate myself to a point that I now know enough to recognise these charlatans. I even went to the trouble and expense to obtain an undergrad degree in economics in an attempt to understand how exactly we got ourselves into this dreadful mess. I learned nothing about it! Had to do the spadework myself.
Hit the spot again Paul! – a classic example – this piece in the IT this morning -of FODAR doing its spinning.
There was absolutely nothing of any value whatever in that piece other than to justify inertia/status quo across the 5 areas you outlined in your first contribution.
Thank you. The disciplined silence of the FODAR foot soldiers and mercenaries has been deafening. And there’s a lack of expertise apparently in this parish to comment on these issues. Still, there’s no need to get on to the pitch when the final score has been decided already.
One of the peculiarities of the article by Prof. Denny is how it makes no reference to the revolution underway in gas supply, driven both by fast-growing exploitation of shale gas resources internationally, and the bypassing of existing gas pipeline infrastructure by LNG (liquid natural gas) tankers.
Contrary to what she says, it is no longer by any means clear that gas prices will be high into the future. Furthermore, the games that Russians and Ukrainians have played over gas supply, which largely triggered Irish worries about energy security, are much less worrying than they were, now that the sources of supply have greatly diversified and that our reliance on gas pipelines has been reduced and can be eliminated.
The strategic decision to be made about how to modernise our energy supplies is no longer the binary one between renewables and nuclear that Prof. Denny suggests. Plentiful natural gas available from a diverse suppliers has the potential to provide new options, whether as the lead fuel in its own right, as a complement to either of the strategies described by Prof. Denny, or indeed as source of generating capacity that can simultaneously compensate for slow winds and offer a backstop to a large baseload nuclear plant.
No matter how complex the Byzantine nature of Irish monopolist politics – we will all hit the physics entropy excrement wall if basic but apparently complex to some solutions are not found / or pitfalls avoided.
Never could understand the Pirate mentality – how can you spend your loot in a dark age – unless these guys crave the open sea and the salty air.
@ Joe Wheatley
“The cracks are already starting to appear. Conventional wisdom says we ignore them and keep building.”
Whatever about cracks and ignoring things Joe, I think a major problem in the way the shift to wind is being implemented is insufficient attention to complementary technology to mitigate the effects of intermittency as described by your very interesting research. Wartsila among other companies has commercialised a line of efficient low cost gen-sets based on the bulletproof marine diesel engine. These machines come online in ten minutes, do not need to be idled, run on either gas or fuel oil,can be distributed around the power grid wherever there is gas or bunker oil supply and are specifically designed to backup wind and solar plant. Estonia is currently building out 200MW of this sort of gas/oil capacity to back its 160MW of wind power and international interest appears to be high.
Worldwide growth in installed windpower capacity is growing faster than any other power gen modality. More wind power capacity was installed in the EU during 2009 than any other electricity generating technology. 39% of total 2009 new capacity was wind, followed by gas (26%) and solar (16%). Renewable power installations accounted for 61% of new installations during 2009. Wind works and it makes economic sense – except perhaps for those who recently invested heavily in fossil gen-set plant and gas distribution assets whose returns are threatened.
I think that some Irish opinion leaders and academics have a vested interest in perpetual inconclusive analysis in the area of energy when in reality the key issues are very clear, appropriate solutions readily available, facts readily verifiable etc. Perhaps this reflects the fact that they are rewarded for activity rather than outcome. If that is what is required for survival that is rather sad. On the other hand given Ireland’s probable medium term future of falling GNP and declining individual earnings it is essential that frivolous, biased or intentionally misleading discussion about energy provisioning issues be nailed. Surely we are in enough trouble as it is.
Seems like a sensible proposal for a DART extension to the airport .. although to be honest I never quite could understand how Dublin fits together – its such a mess…………………
“Alternative energy sources are more capital intensive. The price of capital has increased rapidly too. ”
“Russian gas companies are considerably more reliable and predictable than Irish planners.”
For countries that cannot afford to pay the high salaries of Irelands planners and therefore have to make do, the cost of capital is currently cheaper than it has ever been.
“Oil and gas are of course tightly correlated in price (although shale and LNG may start to shake that)”
I think that ship sailed a while ago.
Capital in wind, while private, is affected by the troubles of the sovereign because (a) so much of the energy sector is state-owned and (b) the government guarantees the wholesale price of wind power
Self-sufficiency is silly. North Korea is the last country to try. As MarcusOC noted, this was last tried in Ireland under De Valera. Think comely maidens and crossraids. It wasn’t a success.
There is nothing special about energy. It is just a commodity. It is essential, but so are many things. The world energy markets are well developed.
I wish I had the confidence with which Richard Tol makes his assertions, but, apart from the odd modifier or qualifier, I would concur with them. However, these assertions apply to a perfect world where the abuse of market power and political meddling have been banished. The US gas market, for a variety of reasons, has come close to this ideal, but every other energy or utility sector in all developed economies falls short, to some extent or other, of this.
The Irish energy sector – and indeed the entirety of the Irish infrastructure and utility sectors – falls further short than most. The first step is to recognise the extent to which we fall short and the next step is to identify and implement the policy and regulatory changes that are required to begin to close the gap. (My name is Ireland and I am addicted to fixes and fiddles..)
But, instead, we have an entire ‘super-industry’ of civil servants, semi-state executives, academic and public, semi-state and private sector researchers, analysts and planners, regulators, consultants, industry associations, trades union officials and PR operatives all purveying, in Harry Franfurt’s words, “an indifference to truth” and seeking to identify and justify some fix or fiddle (or combination of fixes and fiddles) that they perceive will benefit them (or those they represent), but which, inevitably, will leave the majority of citizens and the economy worse off. (The op-ed we are discussing was written by a relatively senior ‘operative’ in this ‘super-industry’.)
There are obviously conflicts and tensions within this ‘super-industry’ (in particular between owners/managers and labour), but these are generally resolved because there are three things on which they are all agreed. First, genuine competition is to be prevented at all costs. (This is the kind of competition that would threaten the value of capital of inefficient or unresponsive producers and suppliers – or of those who made stupid investment decisions.) Secondly, there is a requirement for strong, centralised planning and regulatory control that may be manipulated by the various interested parties to their hearts’ content. And thirdly, the final consumer will be made to pay for all outcomes – whether good, bad or indifferent.
And sorry to disappoint those who love a conspiracy theory, but this is no conspiracy. All those involved in this ‘super-industry’ genuinely believe they are doing the best that they can in the circumstances in which they find themselves. They sleep easy at night. You don’t want to allow circumstances where the value of capital invested might be destroyed; that would be extremely wasteful. You need strong centralised control; you don’t want strangers and foreigners coming in who might not have the best interests of Ireland or its people at heart and exploiting opportunities that noble national businesses would eschew. And it makes sense that final consumers should pay; after all, they get the full benefit of these services so lovingly provided. At the end of it all, the ‘super-industry’ people know the country and its people and have their best interests at heart. They genuinely believe, or are encouraged to believe, these things.
How could anyone argue against such an apparent demonstration of competence, cohesiveness and public-spiritedness? But it is all bullshit. And they know it is bullshit. But not one of them will call it as it is.
One might expect the National Consumers Agency to take up the cudgels on behalf of final consumers; it has the statutory powers and duties to do so. But it is as enmeshed in this ‘super-industry’ as any of the other agencies. And it is virtually impossible to build effective collective action from among millions of isolated, atomised final consumers.
It is only TDs who have the power to tackle this bullshit, but they are so used to being fed it that they believe it is the only item on the menu.
100% self sufficiency is silly , redundancy not so much.
Call me when you realise the 100 year dollar / oil bubble is over.
The energy / transport practises that we consider normal now will die.
De Velaras Ireland could not compete with the western powers whose banking systems were plugging themselves directly into the oil spigot – even if it was a productive system which it was not – although it was probally very energy efficient (input output ratio)
Think of how railways seemed uneconomic post great war as the global oil super heavyweight gained ascendancy and the monetory system changed – the motorways of Ireland will become the modern day version of the Edwardian railways – slowly but surely they will die a slow death.
The monetory system we live under is not fit for purpose – it does not compute the externalties of our energy consumption accuretly.
If we were under the capital static coal based / gold standard monetory system pre great war our expenditures would seem crazy.
As the mobile low capital intensity nature of oil energy begins to wane we will experience another Epiphany but not without much great pain.
it’s worth repeating part of your previous post…
“But, instead, we have an entire ’super-industry’ of civil servants, semi-state executives, academic and public, semi-state and private sector researchers, analysts and planners, regulators, consultants, industry associations, trades union officials and PR operatives all purveying, in Harry Franfurt’s words, “an indifference to truth” and seeking to identify and justify some fix or fiddle (or combination of fixes and fiddles) that they perceive will benefit them (or those they represent), but which, inevitably, will leave the majority of citizens and the economy worse off. (The op-ed we are discussing was written by a relatively senior ‘operative’ in this ’super-industry”
What’s the value of redundancy when the spot market is liquid? And if you value reliability, would you bet on wind power?
Liquid for how long ? – the current oil market for example depends on the US imperium continuing.
The global imperial tax known as the dollar reserve currency is becoming unbearable because of the massive American trade / energy defecit.
The Carter doctrine of force projection in the Gulf is becoming frayed at the edges.
We will be lucky to get another 10 years before a major disruption.
And no I am not a fan of wind power , I would prefer some revenue neutral blanket bog stations in the west ( although the location of Windmills on low hills to the east & close to Tralee seem sensible)
Cahirciveen has a size able blanket bog just beyond the weather station……… on the road to Waterville ( the old station was on the opposite side of the town)
However that will not solve our real base load needs………..the replacement of Moneypoint by more gas stations will be a long term disaster.
A amusing energy animation…………..
The Lucifer principle Vs The Fuller Model…..perhaps I am guilty of looking back to the 50s Peat days and am lacking imagination but it seems more effective then wind power somehow although strictly speaking a depletion game also.
Toll I think you are locked into a depletion economics syndrome – by this I mean you want to reduce capital expenditure so that you can sustain consumption just a little bit longer , I differ slightly but fundamentally – sure we must reduce input consumption but whats the point if no real capital is grown from that tempory surplus ?
Malthus vs the Fuller model……….
@RT: “There is nothing special about energy.”
“It is just a commodity. It is essential, but so are many things. The world energy markets are well developed.”
Richard, with all due respect, I think you had better sit down and make a detailed study of the laws of physics and chemistry, and the specifics of engineering and geology (as they affect energy generation and fossil fuel resource discovery and extraction). I also suggest you study the publications fo Albert Bartlett (if you have not already done so), because if were familiar with these publications, and understood the embedded math, phycics, geological and chemistry implications for future energy supplies, you would refrain from making such ill-structured remarks.
Between 1880 and 1918 western production technologies shifted from coal-based energy to oil. The rest as they say, is history. Our entire contemporary economic, financial, political, consumption and social structures are sitting on the foundation of that ‘easy oil’. Without ‘easy oil’ we go backwards – fast!. Copius electricity supplies will never substitute – because electricity is a secondary energy resource – it has to be generated from primary resources using appropriate engineering technology. Secondary energy sources are not substitutes for primaries (they are complements).
Try explaining how you might erect a wind turbine on the top of Croagh Patrick (its a tad windy up there) using electricity as your ONLY energy source.
@ Richard Tol
‘Imported energy costs less than domestic energy’
great! keep calm and carry on..nothing to worry about! we’ll just keep importing
“@RT: “There is nothing special about energy.”
I shouldn’t take that literally BW. Perhaps the remark had a rather different significance.
‘There is nothing special about energy’
This is the craziest statement I have ever read..
Here is a simple scientific definition of Energy (if you believe in science!)
‘Energy is the ability to do work’
@BW Snr ” Seneca Effect anyone”
” It would be some consolation for the feebleness of ourselves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid” – Lucius Anneaus Seneca – circa 2m years ago.
I share your awareness. Many clever people on here fail to see the implications of our predicament. They will slam into the wall. As Mr. Bartlett says one of our greatest failings is our inability to understand the consequences of the exponential function. Compound interest was a dead cert in the Primary Cert !
Senecas Cliff ! Shark fin soup anyone !
According to his biography in Wikipedia Tol appears to hold controversial views about climate change and energy provisioning – fine. Like most academics he is not accountable for the consequences of Gov policymaking related to any influence his views have. Other opinion-leaders on Irish energy provisioning policy include Tol’s colleagues at ESRI, ESB, BGE etc.
Based on a couple of hours research it appears as if ESB has strategically miscalculated the effect of Green party policies concerning the slice assigned to wind power on its Irish generation business. All of its generation assets seem to be base or intermediate load. A large slice of (intermittent) wind capacity plays havoc with payback on these assets – they cannot be dispatched quickly enough to ‘tango’ with periods of low wind output and in a flat or contracting power demand scenario this implies reduced asset utilisation. For reasons I have not yet understood ESB does not yet operate sufficient peaking capacity to counterbalance the projected wind slice.
It should be understood that wind power causes enormous headaches for power utilities primarily due to the engineering and economic consequences of compensating for its intermittency while maintaining service levels and protecting investment in non-wind plant. Ireland is pioneering in this area and it is right to credit the power utilities for their work in managing the risk involved.
BGE on the other hand, as a more recent generator, has added peaking capacity through its stake in Green Ideas Ltd., which is deploying gas turbines with rapid dispatch capability around the grid. It may be however that these units are too large, slow, costly and fuel inefficient to maximise BGE’s return on capital. Much will depend on how large the slice of wind proves to be. With the departure of the Green Party from Gov I would not be surprised to see political pressure to unwind the commitment made to provide a huge wind power slice in the Irish power mix by 2020 – one comparable only to the state of California.
As an Irish resident I’d prefer to see a balanced discussion around energy economics and energy provisioning and some recognition that addressing the former while substantially ignoring the latter is of academic interest. The situation ESB appears to be in needs to be considered too. If my very superficial research is correct and they are indeed out of step with other power generators both in Ireland and across the world by being slow to provision for a large slice of wind, I would hope that lessons have been learned and changes made. But considering Seneca’s Cliff and the effects of pollution on growth I believe our interests are best served by accepting a huge slice of wind, learning how to integrate this as best we can, and reselling this engineering and political experience around the world
It sounds as if you are relatively new to these shores. You, and your fresh pair of eyes, are indeed welcome. But this is Ireland; and what is really there is not always what meets the eye – in particular when so much official effort is expended to sustain an optical illusion and to suspend disbelief.
You may not have seen my initial comment on this thread:
or my comment on the ‘bigger picture’:
I have no wish or desire to appear patronising or condescending, but i’ve been observing and analysing the unfolding of these issues in various capacities for more than 30 years. I know where quite a few of the bodies are buried 🙂
the exponential function for Dummies [Economists]
I returned in 2005. I am not an economist thank God I’m a researcher and technology developer.
I am less concerned about buried bodies than with seeing my interests as a citizen and businessman upheld in energy provisioning. I did note your posts referred to and also found your Green Paper submission from 2006 to DCMNR interesting reading too.
Thank you for your response. I should have checked your web-site link. I can only wish you well in your endeavours.
Being an economist isn’t all bad – it’s just that so many here and elsewhere are condemned to produce, justify and legitimise the bullshit required to keep the FODAR in the style to which they have become accustomed. (In one sense I don’t blame them. The FODAR provide secure, well-rewarded, pensionable employment. And there is a certain lifestyle to maintain, mortgage to service, kids to raise and educate. If one’s bullshit tolerance threshold isn’t very low (and if you work on it, it can be built up over time), it can be quite a comfortable existence and one can secure the approval of one’s peers and superiors and pretend that one’s professional integrity remains untainted. Why scupper all that for the sake of a bit of honesty. And what good will it do? You’ll be sidelined, isolated or, if you really come clean, you’ll be ejected from the system. And the system will just carry on as if you never existed.)
But it shouldn’t be their responsibility to change this. The onus is on those who demand and consume this bullshit and technically (at least in the sense that TDs have minds of their own) make decisions on the basis of this bullshit.
I mentioned the buried bodies as a jocular reference to Santyana’s “Those who do not learn from history are condemned to repeat it”. Where we are now in the energy sector is the outcome of a long catalogue of absymal policy failings and dire policy and regulatory decisions. Such a layer of bullshit has been generated over that time to conceal, justify and legitimise these failings and bad decisions – and so many people are implicated – that there are only a few of us prepared to put in the effort to dig our way through it.
I know it’s futile, but the damage that’s being done to the interests of consumers and the economy angers me and my genetic inheritance has blessed/(cursed?) me with a bullshit intolerance. So I’ll keep going.
T.D’s and their ability or inclination to innovate,act or speak against the prevailing spin – on any policy area – no chance!
You correctly identify the FODAR as a malaise on the workings of this island not just on energy policy.
Within the FODAR is a relatively small coterie who control the agenda,the thinking,the approaches and the utterances – very few of our elected representatives are in this coterie or have any influence on it – short-term or longterm.
‘Futile’ to point out,highlight and expose to questioning this coterie and their dependents – not at all – doing us all a service!
Just looking at the 2006 house census figures you cited in your latest blog post.
625,988 detached households were recorded back then.
398,360 semi detached & 257,522 terraced houses = 655,882.
A almost equal number when not adding apartments and such !!!!!!
Kerry has 31,825 detached households relative to 7,766 semi and 4,742 terraced houses – nearly 3 times as many !!!
How many working farmsteads are in Kerry now ?
And Irish economists are willfully blind to this huge drag on our end use consumption.
This cannot be a accident – is powerful rural clans farming the productive cities so that they can remain in their South Fork like McMansions ?
The most obvious drag on our economic well being and very little of our fiscal policey is directed towards eliminating this pox.
I though the article made pretty fair stab at mentioning the important themes in the given length.
Though a Glaring Omission was a discussion of what is expected to happen when the fabled secure gas supply becomes (as it will eventually, be it 2, 5 or 15 years) priced out of our reach.
Who will, then, lend us money to live beyond our energy means?
A small energy-rich nation, heavily indebted, nationalises it’s resources to maintain civil society, but incurs the military wrath of it’s creditors. What’s the name of that tune again?
As you may have guessed from the title of this blog, it is about economics. Therefore, we discuss energy-as-traded-on-markets rather than energy-as-in-E=MC^2.
By the way, if you argue that energy is special in economics because it is special in physics, then by the same token material is special (for M=EC^-2) and we should promptly erect trade barriers for all material flows.
of course, I forgot, economics is not governed by the laws of physics!!!
how stupid of me.
we can have an abstract theoretical discussion about economics another day but energy is special in contemporary economics – particulaly in its liberalised globalised form. Maybe in the more localised 18C economies materials and energy could be seen as equally important but not today [but surely economics has moved on from the days of Adam Smith – or has it?] where materials are moved over huge distances. Chicken or egg – it makes no difference but what makes a difference is that the globalised economy is operationalised only by a certain type of energy – liquid fuel – oil. If you do not have available a very plentiful supply of this specialised energy source the growth-dependent debt-based trade-based globalised economy collapses.
You also dont seem to understand the fundamental connection between energy and economics, particularly the supply of money – you cannot disconnect economics from resources as unthinking economists are so keen to to do.
You can actually track one-off numbers here [classified as individual dwelling with private waste-water treatment facility]
If world trade is to collapse because of a shortage of oil, what good it will it do to invest in wind power in Ireland?
did I mention anything about investing in wind power in Ireland? In fact if world trade collapses surely we wont have the capital resources to invest in any infrastructure.
sorry should have said @r tol
ps..now that I have your attention..Fatih Birol?
Fantastic window into the absurd – I will cherish this information resourse until perhaps the lights go out……….
The discussion is about the virtues of import substitution.
What type of scenario would warrant import substitution and is such a scenario even remotely possible?
Import substitution is not a scenario. We subsidize domestic wind to replace imported gas. This policy has been actively pursued by the previous two governments and the current one. The current aim is to subsidize the export of wind energy.
This isn’t really what I asked.
From my understanding, import substitution is economically inefficient but may be warranted as a hedge against extreme circumstances.
Firstly, is this correct? and secondly if so, in your opinion, for energy, what set of circumstances would make import substitution a valid policy? and thirdly are such a set of circumstances remotely possible?
From my experience in electronics a lot of manufacturers are being hurt by their dependence on Chinese rare earth metals which are now the subject of reducing export quotas in order to meet domestic demand. These materials aren’t particularly scarce but China was willing to produce at the lowest price so all other global production shut down as it is very polluting. The US is now rapidly trying to re-open old mines while Japan and Europe are desperately trying to develop recycling technologies. This has been the subject of a complaint to the WTO but it doesn’t seem to be getting anywhere.
If major energy exporters were to adopt a similar strategy would import substitution be warranted?
You should source your input from wherever is cheapest. But you should define cost properly. Low price but risky is more costly than mid price but safe.
That does not justify import substitution, for two reasons.
First, domestic sources may be less reliable than foreign sources. Think Corrib.
Second, domestic sources may be finite. You should leave the gas in the ground as long as you can import gas at a reasonable price.
@ R Tol
One final question.
How should these costs, risks, reliabilities and resource magnitudes be analysed given the degree of uncertainty that seems to exist in the energy domain and the long timeframe that energy policy should cover?
There are various methods, involving models and scenarios, sensitivity, uncertainty, and robustness analysis, and a range of decision rules. Large energy companies employ very sophisticated decision analysts.
Some utilities and more energy companies use decision science. But management decision are, as you might expect, made by managers in the light of whatever input they choose to consider. Decision science simulations may or may not be considered.
Many experienced businesses do not trust modelling and simulation methods to manage complexity such as decision modelling and optimisation, correctly perceiving them to be resource-intensive, slow, costly and impossible for non-technocrats to verify. Reliance on trends and intuition, coupled with conservatism is the basis of the vast majority of strategic decision-making. Its what you would expect, really!
Note you brief reply. Was absent from desk for a bit.
My deep concern about energy is that there is a direct correlation between energy expenditures and aggregate economic activity (and finance as OneOff has outlined). Energy, production, money: a three-legged stool. And each leg is being slowly consumed from within.
You have to go back to 1800 (Malthus). What he missed observing was the steam-powered Technology Bus parked around the corner. This took off shortly afterwards and trundled along merrily until 1870 when it ran out of paved roadway. It struggled on until 1914 when a new bus, with a liquid-fueled ICE started up. This roared away until 1970 or so (perhaps 1980). Now the going was all uphill, and the driver noticed that the distance between filling stations had increased from 2m, to 4m, to 8m, to 16m … … and the incline was becoming ever steeper. Eventually the Bus halted briefly. Some of the passengers alighted and took up residence in some shiney new buildings with some shiney new PCs. Here they commenced to sell electron stuff to each other, and great fun it was until recently. Meanwhile that bus. Steam pouring out of a leaking radiator!
This storey would not have been possible without ‘easy oil’ and some fantastic technology. Electricity – no matter if you could wave a wand and conjure it up can replace ‘easy oil’ In fact there is no chemical on this planet that can substitute for the low molecular weight hydrocarbons in ‘easy oil’. They are real, unique, and most regrettably, finite.
Models on the other hand are virtual constructs! Grand for a journal paper, but useless if you need to cook your dinner.
Its the exponentials Richard.
I thought we were discussing wheter energy was particularly important in economics. I think we have concluded that in a globalised trade based, de-localised and debt-based economy [which is operationalised only to growth and where each unit of growth requires more and more energy] energy is fundamentally important. This fact is inescapable. To try and apply economic theory devised in frontier conditions where the world appeared boundless is a fatal error – as you economists should know, numbers matter.
On the merits of import substitution ..you cannot have a rational discussion on the merits of import substitution today without considering the merits of import substitution tomorrow. Particularly when tomorrow there will be nothing to import [or to import at a price we can afford]