Serious action to reduce CO2 emissions has been stymied in Australia and the US for the moment. So, to get an idea of what is likely to be feasible, and on what timescale, we have to look at Europe, which has both a working Emissions Trading Scheme and a bunch of special incentives to promote renewable energy. At least on the latter point, there is some cause for optimism.
Here’s a graph of new installed capacity and decommissioned capacity for 2009 from The European Wind Energy Association (link here was broken and is now fixed-JQ). The results pretty much speak for themselves, but I’ll add a couple of observations.
The fact that solar PV was a major source of new installed capacity surprised me. Until now, solar (along with fusion) has been one of the contenders for the tag “the energy source of the future and always will be”. But, on current trends, solar is set to be a major contributor in the future. Of course, the outcome so far has been the result of large subsidies, such as feed-in tariffs. But, even as the subsidies are cut back the volume of installations continues to grow. Before long, solar could be competitive with coal on the basis of the ETS and peak-load pricing, without the need for an extra “renewable” subsidy. Gas is likely to be cheapest for some time to come, but there are sound reasons for not wanting to depend entirely on an energy source that can be cut off at short notice.
The other point is that for coal (and also, less surprisingly for nuclear) installed capacity showed a net decline. The combination of the ETS and strong political opposition has made the construction of new coal-fired power stations in Europe almost impossible, at least without a commitment to CCS or some other sweetener.
On this issue, where Europe has led, the rest of the world will follow sooner or later. The big question is whether it will be too late. The good outcomes we are seeing in Europe suggest that, even with a few years’ slippage, big reductions in emissions will be possible in time to stabilise global climate.
John Quiggin 
RE: “The fact that solar PV was a major source of new installed capacity surprised me.”
Relative to solar, wind power has two negative externalities, noise (unwanted sound) and visual pollution. These negative externalities matter in densely populated regions, such as the EU.
China is building 2 coal fired power stations per week, just sayin’. This will continue at a similar or faster pace for at least another 10 years. Coal fired power stations have a operational lifetime of several decades.
I feel more optimistic about fusion lately.
Another small comment, the EU27 has around 430,000 MW of installed thermal (coal, gas) capacity, 135,000 MW of installed nuclear capacity, 139,000 MW of installed hydro capacity.
It’s certainly promising, although it would seem that political obstacles to change both locally and in the United States may prove to be stumbling blocks with significant longevity. Perhaps the situation here will be slightly different after the impending election, but I would imagine that Messr Obama has used up a fair whack of his political capital on health reform.
@Rationalist
China is certainly a big source of new emissions, but they are making some significant progress closing down the least efficient plants, at the same time as building new ones.
As regards the EU, there is plenty of room to cut emissions from coal, and this process is accelerating.
@Rationalist
Not really. Go back and check the ned annual addition to coal capacity
oops net annual addition
@Ernestine Gross
Noise is a fairly termed an externality but I’m not sure that the visual pollution of wind mills is universal or constant. It’s a matter of taste and attitudes to the visual impact might change over time – there are plenty of historic bits of utilitarian infrastructure that are considered marvels in later times. There may also be alternative designs in the future that are considered less of an eyesore. I’d rather wind mills than freeways of coal fired power stations.
“I feel more optimistic about fusion lately.”
I feel optimistic about wind and solar (especially the third generation solar, and possibly small household sized wind generators I’ve seen), although I guess the problem with being optimistic about these is that if they do really get down to the price of coal, then many Australian companies will go broke. Should this really be factored into their share prices, or am I just too optimistic and should go with the crowd?
@Michael
Apparently it is the pattern of shades created by the turning blades which is a major component of the visual pollution of wind farms. Yes, I’ve heard of alternative designs (wind towers). The attitude line is unlikely to be a fruitful one. It has been tried for aircraft noise. It is a red herring. Specifically, the idea that humans’ reaction to aircraft noise is ‘modified’ by their attitue toward the aviation industry is a big red herring. If one interpretes ‘taste’ as preferences then alternatives become relevant, eg. windfarms vs nuclear power, windfarms vs coal dust (ie comparisons of negative externalities other than ghg).
Taste is subjective, but I have always thought wind farms rather elegant and inspiring. Unlike coal plants and nuclear power stations.
jquiggin@#6 said:
The PRC is making “significant progress” in renewable energy installations too, much faster than the EU on a per capita basis, so far as I can judge.
China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year. The NYT reports:
The link to the PRC’s non-renewable energy projects are encouraging and interesting not just from an ecological perspective. It also sheds light on the unstoppable rise of the PRC to global industrial hegemony.
All this points to the elephant in the economists living room: how is it that the PRC is growing so fast with relatively few growing pains? Whats interesting to me about the PRC’s institutional formation – a kind of nationalist state capitalism – is that it appears to flout all the “Washington Consensus” liberal rules about transparent markets, open borders, capitalist commanding heights, floating currency, democracy. Tom Friedman seems to be paying them a few visits these days and you can see his world model being jolted around in his head, bits of cognitive dissonance creeping out into his columns.
Once upon a time economists made great strides in Comparative Economic Systems. Marx, Weber, Rathenau, Keynes, Lange, Hayek, Mises, Nove. Nowadays they would rather study Freakonomic theories about abortion and crime which aren’t even right to begin with. Petty rubbish.
I have always been obsessed with CES. First from an interest in working out theories of capitalism and socialism. But later on I got fixated on German “war socialism” and post-war Japanese MITI developments. (Can anyone spot the similarities between pre-War Germany and post-War Japan?) And the historicist theories of Gerschenkrohn ie actual and existing statism that worked. I now think history is equally if not more important than theory in these questions.
So what is it about the PRC’s evolutionary history that makes it such an economic power-house?
It would be nice if economists knuckled down to their comparative economics to figure out where they went wrong on the PRC. Instead of playing the blame game on the GFC. (I plead guilty here too.)
a) Taste is ‘subjective’. Do you mean arbitrary or as understood by the concept of preferences defined on a space of commodities, characterised by their physical properties, time of availability and location of availability?
b) Is you stated taste indepedent of location?
@Jack Strocchi
Jack S., what exactly is ‘an economic power house’?
@Ernestine Gross
I’m not sure you can compare across sensory modalities (vision versus hearing) in this case. Noise is a different sort of stressor – R Murray Schafer’s ‘we have no earlids’
In 2009, emissions covered by the EU ETS fell by 11%. Some of this would be due to the GFC, but the EU ETS and other policy measures would also make a difference. This would imply emissions are significantly lower than the cap, but because permits can be banked, there is still an incentive to reduce emissions. In any case 11% is a great result.
An interesting difference between ETS’s and carbon taxes is that in an ETS with banking and borrowing, the carbon price is to a certain extent based on the discounted expectation of the future price, which perhaps makes better use of information than a carbon tax.
That’s a very nice point, Peter.
@jquiggin
Correct, improving efficiency of existing plants is very important and I am happy to see China is enthusiastic about employing technology which allows them to get the most out of each tonne of coal burnt. In addition, if all Chinese coal fired power stations were equipped with the same scrubbing and filtering equipment as Australian coal fired power stations are, they would have a smaller problem from particulate, nitrogen and sulphur oxides.
@Fran Barlow
All semantic arguments aside, Chinese coal production doubled between 2002 and 2008. They essentially consume all they produce and they now even rely on imports from places like Australia.
China produces and consumes around 3 billion tonnes of coal per year. (2008 statistic).
In my opinion solar PV is barely viable more than forty degrees from the equator so the uptake in non-Mediterranean Europe must be due to subsidies. Apart from feed-in tariffs I know that in at least one EU country, Germany, electricity resellers are obliged to buy all available windpower whether they want it or not. That is wind generators get both a subsidy and a guaranteed market. This usually requires quick start gas turbine generators on standby to cover wind lulls which raises the spectre of very high fuel costs in the not too distant future.
Thus electricity prices in parts of Europe are double are what they are in Australia. We need to ask whether the 11% emissions reduction can be attributed to stifling of output rather than efficiency. Will the next 11% and the next be harder? Remember we want 80% cuts by 2050 which may be out of range or unaffordable for the wind/gas combo.
PrQ … your hyperlink to the EWEA above has no argument. You’ll need to insert the string value for the URL.
Actually, it does have one, but it is simply “http:///” wish is obviously not a valid string value.
Solar PVs are not necessarily subsidised. Once polluting the ecosystem and/or tragically interfering with the ecosystem are properly accounted for by a pricing mechanism, the once unprofitable may suddenly be contenders due to their low(er) negative effects upon the ecosystem. That’s kind of the point.
With regards to coal fired power, the costs of CO2 extraction and sequestration are sufficiently high to render it marginal in many regions around the world. The costs of extraction and sesquestration are to some extent unavoidable, due to the extra energy required to perform these steps, and the accompanying extra CO2 to be sequestered. Amusingly the most inefficient coal-fired power stations may generate the most CO2 due to sequestration’s extra energy needs, which further increases the cost burden upon these stations if they are required to sequester CO2. PV solar is very competitive in comparison to such coal fired dinosaurs. This may give PV solar the extra investment capital needed to fund even newer PV technologies to market, and that is where the real power of ETS-like schemes lies IMHO.
I haven’t quoted any figures because quite frankly they depend upon very dynamic factors, but ballpark-wise alternative energy technologies using wind, wave, and solar are solid if an ETS system is in place (as in the EU). In the US solar is growing quickly due to incentives, but the incentives are having the desired effect of increasing growth and benefitting from economy of scale price drops. And the US installed 10GW of wind power generation last year, bringing it to 35GW – ironically Texas is a wind energy leader!. Imagine if in Australia we manufactured wind turbines and solar PV hardware – it’s a big market now and we are missing it. It’s time to get on the bandwagon and build some gear of our own on a large scale. Just my 2 cents worth 🙂
@jquiggin
I the point about banking and borrowing from this paper:
Murray, B.C., Newell, R.G., Pizer, W. A., 2009, ‘Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade’, Review of Environmental Economics and Policy 3(1), 84-103.
It also discussed a proposal that was later implemented as the ‘Strategic Reserve’ in the Waxman-Markey bill. Perhaps a nice example of an academic paper having policy impact.
Carbon pricing schemes will make renewables somewhat more competitive even if they need routine backup from fossil fuels like gas. However Australia will have to pay world prices for gas since lobbying for domestic set-aside quotas seems to meet with great resistance. That resistance may lessen in years to come, particularly if the transport industry becomes a major new customer for gas, either in compressed form or converted to petrol.
Let’s say retail electricity prices double 2010-2020 due to a combination of factors. Will household incomes double? Remember with high immigration and strange rainfall patterns household budgets will have find more money for food as well as doubled power bills.
The European solar panel installations can be explained quite simple: I pay them, along with every other German, in particular not so well off Germans. Photovoltaic gets insane subsidies in Germany at least 6 times more than wind. That explains 90% of the installations.
New installed solar capacity from 2009 alone will impose a direct regressive tax of at least 10,4 billion Euro . Those 10,4 billion are based on a 5% increase for conventional energy from a starting point of 5 cent every year for the last 20 years and a discount rate of 20%, which is far far to generous. ( source:http://www.spiegel.de/wirtschaft/soziales/0,1518,672959,00.html). European solar panels are not in Sicilia where they would be twice as efficient, meaning still less efficient than wind energy, they are in Southern Germany. This is not to say that wind is so great, just that photovoltaic is such a huge waste of money in Europe. Give photovoltaic a couple of years, an apropiate externaltiy price for coventional energy and it will take off , but not at the places where photvolotaic installations are done right now thanks to insane subsidies. Sorry for those many at least, its all very opaque, even for people that spent much more time on the subject.
http://de.wikipedia.org/wiki/Erneuerbare-Energien-Gesetz#Verg.C3.BCtungss.C3.A4tze
Wind energy installed in 2009 gets a guaranteed price of 9,2 cent per kw/h, photovoltaic between 43 and 32 cent for the next 20 years. The wind industry isnt any better. The next big subsidiy thing is off shore wind. This time at least Britain is foolish enough to follow Germany. Chinese technology advancements are the least Europe has to fear. They are years behind Europe with both their solar and wind technology. Their labour is just cheap at the moment. Europe doesnt even spend much on research, just lots of money on inefficient current technology installations. Most solar ones are from China. There are many many much cheaper ways to lower environmental damage. Better house isolation, more efficient and smaller cars or just a liquid natural gas terminal. Dont fall into the nice good looking blue toys trap.
Does anyone seriously entertain efficiency measures as a way of combating rising electricity prices. At current prices most people don’t even bother to find out in any detail where electricity is used or wasted. I doubt many households or buildings in Australia are making much progress on this due to a lack of awareness and motivation but there is surely a big scope for this if electricity prices were to rise. I have reduced my own electricity consumption to save money and it’s paid off. Not really difficult or expensive to do if you can be bothered doing a bit of reading.
@hix
Where do you get the number 10,4 billion Euro from? Note that in Europe 1 billion is 1 million millions!
Further, careful with the wiki-site you referenced. There is the remark “Bearbeiten” in several places and there are other communications which indicate to me that the data has not been verified.
Michael, why worry about electricity prices when it is easy to offset the income effects of electricity price increases by other methods?
@Ernestine Gross
Nobody of any significance uses the long scale.
On acceptance of wind, apparently in the late 1800’s Europe had 90,000 wind mills. That is a lot of heritage and many times more than they need today.
Hermit,
Would you care to explain the basis of your considered evaluation of the value of solar PV in northern climbs?
LOL – “the long scale”!
As a private individual I could ‘compare’ (preference ranking) alternative negative externalities in my particular circumstances and so could other individuals, arriving at possibly different rankings (least of two evils kind of idea, including subjective risk assessment, given the personal circumstances such as location, activities, physiological…). Actual experience would be required. I am not suggesting that physiological test results for one type of sensory modality are ‘compared across’ (in the sense of being comparable) to test results for others even under identical circumstances.
@Peter Wood
Your 2009 numbers for the EU Emission Trading Scheme lead to another interesting point for denialists. The EU managed these emission reductions without their world falling to bits. If the world had started emissions reduction back when it otherwise would have, without all the denialist rearguard action, we would already be significantly down the path and there wouldn’t have been much grief.
The wikipedia numbers are correct. Bearbeiten is just the edit page option. I used billion=1000 milions, not million. Source for the calculation for costs from 2009 solar installation is aleady linked up there ( the smaller article on the left)
Solar PotoVoltaic panel operation at higher latitudes.
There are a lot of people who have confused thinking about the features of solar photo voltaics.
The first misconception is that at higher latitudes photovoltaics are less efficient because less solar energy falls on the ground per square metre. This is false because the panels are set up to be normal to the solar radiation ie they receive exactly the same amount of radiation as at the equator, with the only losses being atmospheric due to the extra thickness, reflection refraction. The main difference is that the panels cast longer shadows than at the equator so there will be few panels working per hectare. This is not an issue for building mounted panels as buildings provide sufficient spacing, although solar farms would be far less effective.
Another higher lattitude compensation is that Arctic and Antarctic summer days are far longer than any where else, though the winter from November to January (Arctic) is a solar writeoff due to very short days and snow cover.
The main, little understood, higher latitude compensation is that photovoltaics are far more efficient in colder air. From 100degrees C to 0 degrees C the the efficiency improvement can be over 60%, depending on the panel construction.
So the often quoted claim that the use of Solar PV is pointless in Germany and higher laititudes is completely false. Solar PV works just fine in Finland and Alaska as well.
Externalities? Let’s ask the people.
Click to access WD22vi_public.pdf
September 2003 Report.
@BilB
You have omitted the projection effect of higher latitude
http://en.wikipedia.org/wiki/Insolation
Additionally some populous countries may have more cloud cover since they evolved from regions with reliable rainfall.
If I recall Energy Minister Martin Ferguson said solar is an expensive way to make small amounts of electricity. Which makes hard to explain why he is flogging so much of our gas to foreigners.
No, Hermit, I have not omitted the projection effect. That is what placing panels NORMAL to the solar radiation eliminates. This is what shadow casting covers. Higher latitudes=longer shadows, but the radiation is the same NORMAL to the incoming rays. Ground area less radiation per square metre, panel area standard radiation per square metre. Many others have made this same mistake of understanding.
@Peter Wood
Emissions, across all scopes, have likely increased in the EU since the ETS was introduced.
http://www.businessgreen.com/business-green/news/2259196/study-reveals-scale-outsourced
The EU’s scope 3 emissions, which they are fully responsible for, will likely increase further at the same time as their scope 1 and 2 emissions, covered under the EU ETS, reduce further.
Carbon taxes, in conjunction with a well coordinated carbon tariff amongst major polluters, is a possible method to reduce emissions across all three scopes globally.
Until then, the EU possibly only serves as a model that represents how easy it is to reduce specific scope 1 and 2 emissions (and trumpet this, relatively, meaningless fact) without actually reducing overall emissions.
The graph for nuclear power, obviously, speaks for itself.
But do pro-nuclear sycophants ever really hear it?
One argument we hear ad nauseum from Green Party supporters is that the ETS in Europe has failed and that’s why the Greens voted against it here in the Senate. That argument is just wrong and the Greens are being nothing more than useful fools for the far-right conservatives in the Liberal Party.
Some of the more extreme types that tend to inhabit the Greens and Greenpeace give conservation and environmentalism a bad name by advancing positions that allow opponents to portray any reasonable conservation or environmental initiatives as ‘scorched earth’, incredibly costly, and one step removed from ‘back to the caves’.
Similar may be said for PETA in relation to animal cruelty, animal rights and animal welfare.
In Japan photovoltaics are said to be on the verge of explosive growth as residential grid parity without subsidy appears to be much closer than it was just a few years ago. It is hard to predict the future, but some in Japan -the biggest consumer of Australian gas and coal – are explicitly considering massive reductions in gas and coal imports within a few decades.
Meanwhile in the real world – ie inclusive of subsidies – “When financial incentives are added in, some [Japanese] regions become able to introduce solar power generating systems for astonishingly low cost” TODAY.
http://techo.nikkeibp.co.jp/article/HONSHI/20100326/181377/
Article also discusses 45x increase in Italian PV in three years as a simulation of grid parity.
“”So the often quoted claim that the use of Solar PV is pointless in Germany and higher laititudes is completely false. Solar PV works just fine in Finland and Alaska as well.”
The best regions in Germany manage 1100kwh per kw peak, the best regions in Australia 2300. Sure, photovoltaic works fine in Germany, its just twice as expensive as in some other geographies. Grid parity is not as exciting as it sounds. Photovolatic users still need a grid connection. The grid operator can react and tweak the fee structure, increase fixed fees and lower the consumption dependend price. In a typical household, energy use is not very high while the solar panels produce most energy. The monopoly operators that charge such high prices that grid parity is possible soon wont pay much for that overproduction.
The point I wanted to introduce @1, p1 concerns a problem, examined in the literature on incomplete markets, which tends to be ignored in the policy area. The idea that a carbon price (to solve ghg emission problem) will result in ‘the market’ selecting the appropriate energy production (ie either nuclear or wind or solar or coal…..) is theoretically valid if and only if ghg emission is the only negative externality. This is empirically not the case. So, if one wants a ‘market solution’ one would need to introduce a lot of other ‘markets’ for other negative externalities. This is costly. And, one would need to have not only spot markets for each of them but future markets (say approximated by forward markets). An alternative to markets are administrative prices, eg taxes and subsidies. When considering different local conditions, not only internationally but also within a geo-politically defined country, it would not be surprising at all if different administrative prices are observed for various alternative energy sources. It is a mistake to focus only on the production cost of energy in a non-dictatorial resource allocation, ie in social democracy where economic welfare defined with respect to individual humans rather than to corporations.
The data referenced by BilB and in the diagram in JQ’s post is encouraging regarding corporatism being kept in check.
One would also have to do numerous brain transplants as well. But the types of brains that are required for the transplants to make a completely decentralised approach work (without a bit of help via other coordinated efforts) have never existed. Markets do have problems with intertemporal allocation. Not just because the hardest thing to forecast is the future, but because, as someone else said, they can be subject to animal spirits.
Lets see:
guarantee price for smalll solar installations 2009: 43,01 cent per kw/h
guarentee price for wind : 9,2 cent
Electricity consumption : 621 billion kw/h
—> For just another 210 billion Euro, Germany would not just produce electrity all carbon free, but also without the sight of those ugly windmills.
@hix
With that type of thinking you might be suggesting that the money that was spent invading Iraq and Afghanistan, killing a large number of innocents, providing numerous recruits for al-Qaeda, and displacing millions of people, as well as creating refugees who attempt to come to our shores in leaky boats, could have been put to better use?
Thanks for the encouraging picture Prof Q. On the comment the rest of the world will follow I wonder if China will do that without some other external pressure.
At the moment their competitive advantage is in the price of goods without factoring in the carbon price of production or transportation. China seems quite resistant to the idea of carbon trading – although it is researching new energy sources with a radical rethink of nuclear and taking research from other countries and putting it into production. Should those nations like China, which aren’t involved in ETS, be subjected to an external tax in the form of tariffs? Whilst the free traders would have an apoplectic fit it would provide another market mechanism to engage in a world wide ETS.