September 27th, 2015 27 comments

A new sandpit for long side discussions, idees fixes and so on. Discussions about climate policy and related issues can be posted here, along with the usual things.

Categories: Regular Features Tags:

The last Trump …

September 26th, 2015 11 comments

… has blown for any notion of “sane Republicans”. Comment seems superfluous, but I will repost some older pieces, going back to 2004, which I think stand up pretty well

Science versus the Republicans
Ignorance is strength
Has vaccination become a partisan issue?

Categories: World Events Tags:

Income distribution: where should we start ?

September 26th, 2015 18 comments

Here’s another draft extract from my book-in-progress, Economics in Two Lessons, looking at income distribution. The entire draft section on this topic is available here. And the introduction, describing the general approach of the book is here.

Praise is welcome, and useful criticism even more so. As a reminder, this is an extract. If you think a crucial point has been missed, point it out, but bear in mind that it may be addressed elsewhere in the book.

Read more…

Categories: Economics in Two Lessons Tags:

Meet the new boss …

September 24th, 2015 44 comments

As has happened before, I was travelling when the Prime Ministership suddenly changed hands. I’m still on holiday, though I briefly appeared before the South Australian Royal Commission on the Nuclear Fuel Cycle yesterday. But even without following the news closely, it’s easy enough to see that the Turnbull LNP government is basically the Abbott government with the gratuitous culture war element removed.

On climate change, for example, we’ve seen the end of attempts to kill the highly successful Clean Energy Finance Corporation, but no major change to the absurdly misnamed “Direct Action” policy, and a doubling down on Abbott’s support for coal from newly promoted minister Josh Frydenberg.

In particular, contrary to suggestions that Turnbull is going to push for a more “market liberal” approach, Frydenberg is still touting the idea of subsidising the Adani Carmichael boondoggle. I doubt that anything will come of this (on this score, the supposed deal with Downer EDI to build Adani’s railroad seems to have quietly died), but it’s indicative of the government’s position. And the new coalition deal, handing over water policy to Barnaby Joyce, amounts to a repudiation of everything Turnbull stood for when he was Water Minister under Howard.

The abandonment of the culture wars looks like something of a double-edged sword. On the one hand, it was obviously necessary, given the extent to which Abbott’s absurdities discredited the whole enterprise. On the other hand, much of the LNP base and commentariat are so committed to culture war politics that they will have grave difficulty in supporting Turnbull even if they want to: most of their usual lines against inner city elites, latte liberals and so on are far more applicable to their own new leader than to Labor and the Greens.

My success as a pundit is notoriously mixed. Still, I find it hard to see how Turnbull can sustain his initial bounce in the polls without taking tougher decisions than those he has been willing to make so far.

Categories: Oz Politics Tags:

Climate change and catastrophe

September 24th, 2015 46 comments

I have a piece in The Economist climate blog, making the point that the risk of catastrophic climate change has been ignored by “lukewarmists” like Bjorn Lomborg and Jim Manzi.

Categories: Environment Tags:

A CHAFTA election? (updated)

September 17th, 2015 47 comments

Malcolm Turnbull’s coup against Abbott has been the subject of much commentary, and I didn’t have anything to add. But now it’s time to look beyond the juggling of Cabinet positions and to consider some of the long term implications. Turnbull’s rise takes off the table, or radically changes the politics of, a number of issues that would have been central to an Abbott election campaign. Most obviously, there are the issues (climate change, equal marriage, republicanism) where Turnbull is known to agree with Labor but has said he will stick with Abbott’s policies. Obviously, Turnbull can’t run hard on these. It remains to be seen whether Labor can make political mileage out of the contradictions involved.

The ground Turnbull wants to fight on is that of economic liberalism, primarily as represented by the so-called Free Trade Agreements with Korea, Japan and, most importantly, China.

Turnbull has the near-unanimous support of the elites on these deals, even though it’s hard to find even a single economist who would support them with any enthusiasm. Anyone who has looked seriously at the issue understands that the trade aspect of these agreements is trivial. What matters are the side clauses on issues like Investor-State Dispute Settlement procedures, intellectual property, environmental protection and so forth. Unfortunately, political journalists, as a class, don’t do much thinking.

Here, for example, is Laurie Oakes, asserting that

>Labor needs to end up supporting this trade deal. That is the bottom line

but not providing a single argument in favour. In typical “Insider” style, Oakes says

The government charge that Labor is sabotaging jobs would not be a difficult one to sustain.

without worrying about whether this charge is actually true (it isn’t).

In the case of CHAFTA (the unlovely acronym for the China deal), the big problem is not in the agreement itself, but in a “Memorandum of Understanding”, which provides for circumstances under which a Chinese company can import its own workforce, without labour market testing (that is, even if there are Australians willing and able to fill the jobs) and without matching existing conditions.
Read more…

Categories: Economic policy, Oz Politics Tags:

Monday Message Board

September 14th, 2015 135 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Is global collapse imminent ? (repost from 2014)

September 10th, 2015 439 comments

Update \ I thought I’d repost this a year on, and reopen the discussion 10 September 2015

Reader ZM points me to a paper with this title, by Graham Turner of the University of Melbourne. Not only does Turner answer “Yes”, he gives a date: 2015. That’s a pretty big call to be making, given that 2015 is less than four months away.

The abstract reads:

The Limits to Growth “standard run” (or business-as-usual, BAU) scenario produced about forty years ago aligns well with historical data that has been updated in this paper. The BAU scenario results in collapse of the global economy and environment (where standards of living fall at rates faster than they have historically risen due to disruption of normal economic functions), subsequently forcing population down. Although the modelled fall in population occurs after about 2030—with death rates rising from 2020 onward, reversing contemporary trends—the general onset of collapse first appears at about 2015 when per capita industrial output begins a sharp decline. Given this imminent timing, a further issue this paper raises is whether the current economic difficulties of the global financial crisis are potentially related to mechanisms of breakdown in the Limits to Growth BAU scenario. In particular, contemporary peak oil issues and analysis of net energy, or energy return on (energy) invested, support the Limits to Growth modelling of resource constraints underlying the collapse.

A central part of the argument, citing Simmons is that critics of LtG wrongly interpeted the original model as projecting a collapse beginning in 2000, whereas the correct date is 2015.

I’ve been over this issue in all sorts of ways (see here and here for example, or search on Peak Oil). So readers won’t be surprised to learn that I don’t buy this story. I won’t bother to argue further: unless the collapse is even more rapid than Turner projects, I’ll be around to eat humble pie in 2016 when the downturn in output (and the corresponding upsurge in oil prices) should be well under way.

Given that I’m a Pollyanna compared to lots of commenters here, I’d be interested to see if anyone is willing to back Turner on this, say by projecting a decline of 5 per cent or more in world industrial output per capita in (or about) 2015, continuing with a sharply declining trend thereafter. [minor clarifications added, 5/9]

Categories: Environment Tags:


September 9th, 2015 103 comments

A new sandpit for long side discussions, idees fixes and so on. Discussions about climate policy and related issues can be posted here, along with the usual things.

Categories: Regular Features Tags:

Bernie Fraser: A brief appreciation

September 9th, 2015 13 comments

Bernie Fraser has just resigned as Chairman of the Climate Change Authority, of which I’m a Member. His chairmanship marked the culmination of a long career of public service, in which Bernie served as both Secretary of the Treasury and Governor of the Reserve Bank. Over many years, I’ve sometimes agreed and sometimes disagreed with Bernie on particular policy issues, but I’ve always found him to be committed to serving the Australian people and to a broad and humane view of our collective interests. At a personal level, he’s a great person to deal with and work with. He will be a big loss to the Authority, but we have made arrangements to carry on our work.

One of my Twitter followers asked for a post on which people might write appreciative comments, and here it is. If you want to discuss anything else (climate change policy, macro policy in the 1980s and 1990s, the future of the CCA) I’ll be opening a sandpit for this purpose.

Categories: Life in General Tags:

When did “Free Trade Agreements” become “reform” ?

September 8th, 2015 15 comments

The Oz is pushing hard for the China-Australia Free Trade Agreement. Support for the deal was (AFAICT) the only significant output from the “National Reform Summit” held by the Oz and AFR a week or so ago. This raises a few points of interest.

* Until very recently, bilateral trade deals of any kind were seen as the antithesis of free-market reform. Reformers favored either unilateral removal of trade barriers or global deals through the World Trade Organization. Admittedly, the latter is clearly a forlorn hope, but what happened to unilateral free trade

* Second, it ought to be clear by now that “reform” means “whatever the Oz and IPA wants”. For example, tax reform doesn’t mean taxing mineral rents or carbon externalities or tax-dodging trusts and shell companies. In essence, it means taxing food and giving the proceeds to the rich. Anyone concerned with good policy should stop using this word in a positive sense

* Most importantly, “Free Trade Agreements” are nothing of the kind. The key to the China deal is the expansion of the 457 system to allow for 100 per cent overseas workforces. Even if you think that’s a good idea, it should be addressed in the context of immigration policy. There’s a startling contradiction between this stuff and Joe Hockey’s high profile persecution of Chinese buyers who are allegedly pushing up the price of Sydney houses.

* The same is true of the other FTA’s this government has signed, and even more so of the proposed TPP. At most, the trade component of these deals consists of Australia selling its domestic policy sovereignty to foreign governments in return for the removal of their trade barriers.

Economics in Two Lessons: Income Distribution

September 7th, 2015 44 comments

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. Rather than work sequentially, I’m jumping between:

Lesson 1: Market prices reflect and determine opportunity costs faced by consumers and producers.


Lesson 2: Market prices don’t reflect all the opportunity costs we face as a society.

In the section over the fold, I’m looking at how opportunity cost reasoning applies to policies that change the distribution of income, wealth and other entitlements.

As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

Read more…

Categories: Economics in Two Lessons Tags:

CCS vs Hazelwood (updated)

September 7th, 2015 33 comments

It’s often hard to get an idea of the scale at which different technologies are operating. For example, there’s a lot of discussion about Carbon Capture and Sequestration (CCS or ‘clean coal’), though less than there used to be. To get an idea of current and near-future prospects for CCS in the power sector, I went to the Global CCS Institute list of large-scale projects. The site says

Large-scale CCS projects in the power sector are now a reality, demonstrated by:
* The world’s first large-scale power sector CCS project – the Boundary Dam Integrated Carbon Capture and Sequestration Demonstration Project in Canada (CO2 capture capacity of 1 Mtpa) – becoming operational in October 2014
* Commissioning activities on a new-build 582 megawatt (MW) power plant beginning at the Kemper County Energy Facility in Mississippi (US, CO2 capture capacity of 3 Mtpa) with CO2 capture expected to commence in the first half of 2016
* The Petra Nova Carbon Capture Project at the W.A. Parish power plant near Houston, Texas (US, CO2 capture capacity of 1.4 Mtpa) entering construction in July 2014, with CO2 capture anticipated by the end of 2016.

Tactfully ignoring the fact that the Kemper project has turned out to be a disaster, I thought I would scale this against an option that we can all comprehend, shutting down the brown coal power station at Hazelwood. According to this article, Hazelwood generates 15.7 million tonnes of CO2 per annum, or about three times the total from all CCS Power projects now in operation or under construction.

Looking further down the page, there’s a summary of all the CCS projects currently at any stage of consideration anywhere in the world

Globally, there are 14 large-scale CCS projects in operation, with a further eight under construction. The 22 projects in operation or under construction represents a doubling since the start of this decade. The total CO2 capture capacity of these 22 projects is around 40 million tonnes per annum.

There are another 14 large-scale CCS projects at the most advanced stage of development planning, the Concept Definition (or Define) stage, with a total CO2 capture capacity of around 20 million tonnes per annum. A further 15 large-scale CCS projects are in earlier stages of development planning (the Evaluate and Identify stages) and have a total CO2 capture capacity of around 30 million tonnes per annum.

So, if all of these projects were successfully completed, they would offset the emissions of six Hazelwood-sized plants. It gets worse. Many of these projects serve only to reduce the “fugitive” emissions from oil and gas fields, and most rely for their viability on using the captured CO2 in oil fields, to push more oil to the surface (enhanced oil recovery).

It’s time to bury the myth of CCS once and for all.

were implemented on schedule, the impact over the next fifteen years would be negated if we allowed Hazelwood to continue operating over that period.

Categories: Environment Tags:

The great replication crisis

September 3rd, 2015 30 comments

There’s been a lot of commentary on a recent study by the Replication Project that attempted to replicate 100 published studies in psychology, all of which found statistically significant effects of some kind. The results were pretty dismal. Only about one-third of the replications observed a statistically significant effect, and the average effect size was about half that originally reported.

Unfortunately, most of the discussion of this study I’ve seen, notably in the New York Times, has missed the key point, namely the problem of publication bias. The big problem is that, under standard 20th century procedures, research reports will only be published if the effect observed is “statistically significant”, which, broadly speaking means that the average value of the observed effect is more than twice as large as the estimated standard error. According to the standard classical hypothesis testing theory, the probability that such an effect will be observed by chance, when in reality there is no effect, is less than 5 per cent.

There are two problems here, traditionally called Type I and Type II error. The classical hypothesis testing focuses on reducing Type I error, the possibility of finding an effect when none exists in reality, to 5 per cent. Unfortunately, when you do lots of tests, you get 5 per cent of a large number. If all the original studies were Type I errors, we’d expect only 5 per cent to survive replication.

In fact, the outcome observed in the Replication Study is entirely consistent with the possibility that all the failed replications are subject to Type II error, that is, failure to demonstrate an effect that is there in reality

I’m going to illustrate this with a numerical example[^1].

Read more…

Categories: Economics - General Tags:

My submission or the Abbot Point port expansion Environmental Impact Statement

August 28th, 2015 22 comments

The Queensland government is going ahead with (or, more hopefully, going through the motions of) the process for expansion of the Abbot Point coal terminal. A Draft Environmental Impact Statement has just been released, and there is a call for comments here

Read more…

Categories: Economics - General, Environment Tags:

We need a new word for “reform”

August 27th, 2015 44 comments

Hardly anyone bothered to pay attention to the “National Reform Summit” put on by the Oz and the Fin the other day. The word “reform” tells us everything we need to know about this event: yet more invocations of the exhausted policy agenda of the 1980s, all with the implicit message that we need to work harder. Both Jeff Sparrow at Overland and Ben Eltham at New Matilda have pieces today making this point.

“Reform”, meaning “change for the better” was always a problematic concept, but it was a useful word, and we don’t have a good alternative. I don’t think a single replacement is feasible, but I’d like to try out some alternatives, and call for other suggestions

“Redesign” and “restructuring” are reasonably neutral and can be used to indicate a wide range of policy changes, without assuming anything specific. For example, “retirement income policy redesign”.

“Liberalisation” describes a wide range of things for which “reform” is commonly used, for example “drug law liberalisation” or “financial market liberalisation”. This gives a pretty clear indication of the general line of policy change, without the approval implicit in “reform” (except to the extent that support for liberalization in general is assumed).

What is lacking is a good single word term for what was the primary connotation of “reform” until the 1980s, namely, policy changes along social democratic lines. Any suggestions?

Categories: Dictionary, Oz Politics Tags:

What do destroyers destroy? What do frigates … ?

August 25th, 2015 192 comments

The Abbott government is copping plenty of flak (metaphor used advisedly) over its obvious politicking with respect to the construction of a new class of guided-missile frigate for the Royal Australian Navy. The project with total costs touted at $90 billion is promised to create lots of jobs in South Australia, perhaps replacing those when the same government, in its free-market incarnation, welcome the death of the car industry.

Rather than pile on, I’ll ask a question which, from past experience, I know is bound to annoy many. What are these things supposed to do?

As far as I can tell, guided-missile frigates are supposed to shoot down aircraft and missiles, but this seems, on the face of things, to be an absurd proposition. Pitting an effectively stationary boat, costing the better part of a billion dollars, against missiles (fired from land or from aircraft), travelling at the speed of sound or more, and costing a million dollars apiece, seems like a hopelessly lopsided contest.

Of course, it’s just about impossible to test this proposition. AFAIK, the only conflict in which surface ships have actually engaged in combat with aircraft using missiles was the Falklands, more than thirty years ago. That didn’t appear decisive: the Royal Navy managed a win against the air force of a Third World country, but took some heavy losses in the process. But technology has advanced a long way since then, and there’s no way of testing which side of such conflicts it now favours. So, naval advocates can make up whatever claims they like about the capabilities of the ships we keep on buying.

Of course, the fact that there has been so little naval warfare in the last 70 years or so seems to me to be a very strong argument for spending less on money on warships.

Readers will be aware that I think war is almost always disastrous for both sides, that most military spending is wasteful and harmful, but that I know this to be a minority view. Even given that, the case against spending money on navies (and particularly surface fleets) seems so overwhelming to me that I’m amazed to find hardly anyone in agreement.

Categories: Economics - General Tags:

Is anyone surprised …

August 25th, 2015 23 comments

… by Martin Ferguson’s emergence as an enemy of the Labor Party and the trade union movement? I’m certainly not. Ten years ago, reviewing Michael Thompson’s Labor without Class, to which Ferguson contributed a laudatory foreword, I wrote

The obvious inference from Thompson’s book is not that Labor should change its position but that he, and others who share his views, should join the Liberals.

In 2009, looking at political nepotism in general, I said,

People like Belinda Neal and Martin Ferguson would never have made it into Parliament on their own merits, and would probably have been on the other side if not for their family ties

In between, I noted Ferguson’s support for John Howard’s climate do-nothingism as an argument against the hereditary principle in politics.

My record as a political prognosticator is notoriously mixed, but I got this one right.

Categories: Oz Politics Tags:


August 24th, 2015 44 comments

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

Categories: Regular Features Tags:

Monday Message Board

August 24th, 2015 65 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

War and technological progress

August 22nd, 2015 46 comments

One of the big benefits of blogging for me is the chance to try out my ideas on an audience I couldn’t easily reach (or at least hear back from) in any other way. That’s particularly true when I’m writing a book, which is always a difficult process for me. My last post, on the opportunity cost of war produced a great comments thread. Particularly useful was a discussion, started by Chris Bertram at Crooked Timber, of the oft-heard claim that war stimulates scientific and technological progress. I’ve used my response, along with points appropriated from commenters to draft a new section for the book, pointing out how this claim ignores the problem of opportunity cost.

As always, comments of (nearly) all kinds are appreciated, and useful ones may be recycled.

Read more…

Categories: Economics in Two Lessons Tags:

Three word slogans

August 22nd, 2015 18 comments

I have a piece up at the Drum, looking at how the three-word slogan approach of the Abbott government helps to explain their budget problems. Text is over the fold

Read more…

Are there any sceptical “sceptics”

August 21st, 2015 40 comments

The US National Oceanic and Atmospheric Administration just reported that the global mean temperature for July 2015 was the highest for any month since record keeping began in 1880. That follows a string of record-breaking months. And with a major El Nino well under way, it seems highly likely that more record high temperatures will follow.

To anyone with a sceptical attitude to factual assertions, this evidence would appear to cast grave doubt on the claim that the world is experiencing a “hiatus” or “pause” in global warming. On the face of it, either the supposed “hiatus” never occurred, or it has now ended.

So, it’s natural to ask whether such sceptical attitudes have been observed among those who describe themselves as “global warming sceptics”. I would be genuinely glad to find examples, since it would imply some possibility of serious discussion, as opposed to a restatement of tribal shibboleths.

Are any sceptical sceptics reading this? Has anyone else noticed any? Or are self-described “sceptics” only sceptical about things they don’t want to believe.

Categories: Environment Tags:

Big Tobacco: A threat to Australian democracy

August 20th, 2015 29 comments

The news that the tobacco industry is seeking to abuse Freedom of Information legislation to gain access to surveys of Australian teenage attitudes to smoking confirms what has been obvious for a long time. The tobacco industry is a threat to democracy. Among its many hostile actions
* Misusing ISDS and other provisions of trade treaties to undermine domestic health policy
* Debasing public debate through the use of scientists for hire, fraudulent lobby groups and thinktanks, vexatious litigation and other tactics. In the use, these actions have led to criminal racketeering. The denialist apparatus set up by the tobacco industry was taken over by the fossil fuel lobby to promote global warming denialism
* Large scale purchasing of politicians and political parties

The big question is, what should be done about this? We need to consider a comprehensive approach to drug policy, which would also take account of the failure of the War on Drugs, and provide a model for legalisation of currently illegal drugs. That rules out prohibition of tobacco, but would leave no role for corporate pushers.

Even if we don’t get there immediately, it’s highly desirable to start the discussion. Big Tobacco and its friends should be warned there is something to lose from attacking democratic government.

Categories: Oz Politics Tags:

The opportunity cost of war

August 19th, 2015 37 comments

What is true of natural disasters is even more true of the disasters we inflict on ourselves and others. Of these human-made calamities, the greatest is war. The wars engaged in by the US, Australian and other governments come at the opportunity cost of domestic programs that could save thousands of lives every year. The cost of war, in terms of American (and Australian) lives, is many times greater than battlefield casualty counts would suggest.

That’s the theme of this extract from my book-in-progress, Economics in Two Lessons. You can find a draft of the opening sections here.

Read more…

Categories: Economics in Two Lessons Tags:

Polls and punters, yet again

August 17th, 2015 52 comments

I just read this piece on The Drum, taking the line that it’s better to rely on the betting markets, which have Labor and the government level-pegging, than on the polls, which have had Labor well ahead for a long time. Elections are only held every few years, so they don’t provide much data on which to test the relative performance of the two. But, if markets give better estimates than polls, we should expect to see movements in the poll results follow those in the market rather than vice versa (in econometrics, this is called Granger causality). Digging around, I located a study finding that, if anything, movements in polls Granger cause movements in betting markets.

Since a compelling observation beats an econometric analysis for most people, let’s look at the 18 months or so since I last posted on this topic. Labor started out with a small lead in the polls and stayed consistently in front, with the lead varying over time. Meanwhile, the betting markets favored the government until very recently, before moving to even money. It seems clear in this case, that the markets are following the polls and not vice versa.

Categories: Oz Politics, Politics (general) Tags:

Green jobs

August 17th, 2015 13 comments

The question of “green jobs” has arisen in a lot of different contexts. At present, the most relevant is the problem of how to deal with the employment effects of the necessary and inevitable decline of industries based on fossil fuels. Part of this question is whether expanding sectors of the economy will create a number of new jobs comparable to those that disappear , and whether those jobs will be appropriate for the kinds of workers who worked, or would have, in the declining sector (that is, predominantly, male manual and trades workers). There are a lot of conceptual problems here, which I’m not going to address in detail. Rather, I’ll just look at some raw numbers and throw in some comments.

I was struck recently to read that, in the United States, the solar power industry now employs 174 000 people. That’s twice as many as coal mining. And, while these aren’t direct substitutes, they are, it would appear, broadly similar kinds of industries in the sense that the core workforce is dominated by male manual and trades workers.

Looking quickly at similar stats for Australia, I found that the numbers were reversed. According to the ABS, there were just under 40 000 Australians employed in the coal mining industry in May 2015, down from a peak of 60 000 in 2012, but well above the 20 000 or so employed in the early 2000s.

The Clean Energy Council estimates around 20 000 jobs in the renewables sector in 2014 – that’s up from virtually zero before 2010. So, broadly speaking growth in renewables has offset the decline in coal mining.

One specific issue in the US, that’s less of a problem here, at least in Queensland, is that of declining communities in places like Appalachia. Thanks to the practice of Fly-in Fly-Out, there are many fewer Australian communities focused on coal mining.

Finally, some related statistics I found in the process of researching this. The forestry and logging industries currently employ 3900 people (this number bounces about a lot, so I’m not sure how reliable it is). That’s about the same as the combined total for the NSW and Victorian National Parks systems. I expect if you added in various kinds of manual/trades jobs in adventure tourism and similar, you would find a net gain over the past 25 years or so.

Categories: Economic policy, Environment Tags:

Monday Message Board

August 17th, 2015 16 comments

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Are natural disasters economic disasters ?

August 14th, 2015 14 comments

Yes. This has been the latest in our series “Short Answers to Misconceived Questions”.

Actually, there’s a longer answer over the fold, another extract from my book-in-progress Economics in Two Lessons. You can find a draft of the opening sections here.

This extract is a subsection of Part 2, in which I explore the implications of Lesson 1:
Market prices reflect and determine opportunity costs faced by consumers and producers.
The conclusion is

if the damage bill measures the cost of restoring assets to their pre-disaster condition, it is also equal to the opportunity cost of the disaster, namely the goods and services that would otherwise have been produced.

I’ll be interested to see whether readers’ reaction is “That’s obvious” or “That’s obviously wrong”, assuming of course that you have any reaction at all. As always, civil comments of all kinds are welcome, particularly constructive criticism.

Read more…

Categories: Economics in Two Lessons Tags:

Solar PV (now with grid backup)

August 13th, 2015 60 comments

Following my previous post there was some discussion about the need for grid backup of solar PV to deal with extended periods of overcast weather. It’s obvious that storage will help with this to some extent, since batteries can store electricity from the grid as well as from distributed solar. I thought I would try to put some numbers on this (slightly changed from last time to simplify the numbers).

I’ll focus on 1 kW of solar PV generating an average of 4.8 kWh per day, with (as before) 2 kWh of storage. If there is zero solar generation and no demand management, the entire 4.8 kWh per day must be drawn from the grid. In the absence of storage, we might suppose that 1kW of backup capacity is needed to match the peak output of the solar PV system. But with storage, all that is needed is enough to supply 4.8 kWh over the course of a 24-hour day, that is, 0.2 kW.

The optimal backup choice is a fully dispatchable technology such as hydro or gas. Hydro resources are pretty much fixed, so I’ll focus on gas. According to the US Energy Information Agency, the capital cost of gas-fired power plants is around $1000/kw so our grid backup will have a capital of cost only $200 for each kW of distributed solar. There’s also the need to take account of fuel and distribution costs. Fuel costs will be low since the system is only used as backup, while distribution costs will be around 20 per cent of what would be need if peak loads were to be met by centralised generation.

To sum up, if battery storage becomes available at a sufficiently low price, there’s no obvious problem with a system in which over 80 per cent of capacity, and an even larger proportion of generation is distributed solar PV.

Categories: Environment Tags: