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John Quiggin 
A couple of questions from a curious non-economist:
1. Apparently, the demand for electricity has fallen, presumably because of the proliferation of domestic solar panels. Why then has the price gone up, defying the law of supply and demand?
2. What would be the difference in capital investment to build a coal fired power station and a renewable energy system capable of generating the same amount of electricity as the power station over, say, a 12 month period?
3. Is there an economic reason why “direct action” and a “price on carbon” could not be implemented simultaneously, as my logic would suggest?
4. Is there an economic theory that could guide a society with long term negative growth or even no growth when the population stabilises, as it inevitably must or are we destined to be an economic Mr Creosote?
5. Is there any truth in the rumour that Labor has sacked its PR firm who are now advising ISIS with the same tactics?
1. I’m led to believe it is perverse investment incentives resulting in overinvestment in poles and wires.
3. Only because a price on carbon is better, so direct action will cost more for the same result (or no result, if you don’t have penalties for not delivering).
4. There is a Nobel prize on offer if you can supply a no growth theory that does not clash with human nature. And you get 10 times the money if you can get the Murdoch press to support it.
5. What, public beheadings?
I don’t know about economic theories of no-growth (although I do believe that there has been some investigaiton of the concept of a ‘steady-state economy’), but as an actual example of a no-growth society, I nominate Japan.
Naomi Klein has a new book This Changes Everything.
From the introduction:
And it wasn’t just earnest, but misplaced, good intentions on the part of those pushing the ‘market’ solutions. There is a very virulent strain – especially in Australia with ALP supporters for example – of pro-market fundamentalists who shout down anyone questioning the idea that a ‘market’ scheme can achieve what is needed.
@Geoff Andrews
Geoff, the price of electricity has gone down, it’s just that what people are being charged for it hasn’t. Why are electricity distributors charging more? The short answer is because they can.
And note that rooftop solar is only one reason why electricity consumption has gone down. The fall in consumption has been much greater than what is being generated by solar.
2. Wind power cheaper than new coal capacity. Rooftop solar is cheaper than electricity supplied by the grid from any source.
3. As mentioned, a carbon price is superior.
4. I don’t really understand this one.
5. The mother of Horus requires no paltry mortal PR.
The wealthier and more prosperous we are told we have become, the less coin we (are told we) have for putting back into our most creative and curiousity-driven scientific endeavours, things that enrich society. The shrinkage of CSIRO is lamentable: for example, CSIRO no longer has a maths/stats/informatics departmental presence in South Australia, thanks to the most recent round of budget cuts. It is a great pity, for CSIRO invests significant effort into student outreach,^fn1 this taking place about the time many of them are contemplating careers and the necessary study to get there. Not much chance of doing an internship in mathematics, statistics, bioinformatics, etc here, if there isn’t even a departmental presence in SA!
Honestly, is this even remotely sensible as a budget “repair” strategy for Australia? If we want to repair the budget, how about looking at politicians and their basic salaries, their work expense claims, their superannuation scheme, their manifestly inadequate number of sitting days, their corrupted party donation practices, and so on. Politicians should endure the same pay rise restrictions as all other public servants, should lose recreational leave as trade-off for keeping their jobs, and so on. Just like the public servants they so readily disparage. Grrr.
fn1: Actually, CSIRO conducts significantly less outreach now, thanks to those budget cuts. A savage axe indeed, the one that swung through the education and outreach staff.
This is a reply to PatrickB @39 on the Policy lessons from G20 thread. Patrick, if you see this, I wanted to support your call, and I went to the RN website, but I thought I had to know what was said in the program first, and I couldn’t bear to listen to it. Really sorry to wimp out. If there had been a transcript, I would have read it, but I couldn’t see one, and listening to it just seemed too much to bear.
Just – the ABC – Amanda Vanstone – to begin with, let alone some program making excuses for violence against women – too much. I can argue with left wing men about sexism, because there are some basic rules, but listening to apologists for violence against women on Amanda Vanstone’s program is too much. It’s like the question JQ canvasses here, although he puts it much more politely – are right wingers stupid or bad (however you wish to read ‘bad’)? I think people like Amanda Vanstone and Malcolm Turnbull are not stupid, and not knowingly evil, they are just in a bubble – a bubble of, this suits me, I will do ok if I go along with this, and let’s not look at who gets hurt (probably closer to what JQ is saying than the ‘bad’ shorthand, really). What to do? At least if we don’t listen, they don’t get the numbers, but sometimes I despair.
“What would be the difference in capital investment to build a coal fired power station and a renewable energy system capable of generating the same amount of electricity as the power station over, say, a 12 month period?”
For a generally applicable case, comparable with an Australian utility sized coal power station (think 500-1000 MW+) – the answer is — no one really knows.
Outside of hydro and geo hotspots, and one or two so-called renewable/environmental biomass plants, there really is no such thing proven and available that will always meet current demand curves for a whole year.
There are theoretical possibilities, along with costings, but this also isn’t the same thing as a real proven example. I think AEMO was +30% cost, but the cynic would say it is an order of magnitude out and still unproven.
There is also some discussion about realigning demand curves and of course the whole — “it’s cheaper already and SA was 100% for a few hours and those crazy engineers don’t understand economics and we really need to retrain the lot of them”.
@Ronald Brak
Thank you (and all the others, above) for your/their response/s to my bemused questions.
I’m not arguing: just asking.
1. If the price of electricity has gone down but we, the consumers, are being charged more and this price increase appears to be using as a stick to beat Labor, do we have the Opposition we deserve?
2. If all (or most) of renewable power sources are cheaper than coal as you assert, where are the screams of outrages from Labor or the renewable industry or do they (Labor, et al) know something that you & I don’t.
3. Surely it doesn’t matter which of the two systems is cheaper. If they are both tending in the same direction, they are not incompatible and one may, in the long run, prove to be only slightly more successful than the other at reducing greenhouse gases. Both may be able to contribute. The development of more than one computer operating systems has not held back computer technology.
4. At some time in the future, let’s say 2060 when the world population has doubled but finally peaked at 14 billion; at the E20 conference (E=economists) held in balmy Mawson, Antarctica, the meeting finally has to admit that there is nothing that they can advise their respective governments to do because all economic theory thus far has been based on the certainty of population growth or even cleverer, growing FASTER than the population growth.
continuing from #8…..
So, in 2014 some professions can land a scientific experiment on a rock a couple of kilometres in diameter 500,000,000 km away travelling at 30,000kph but economists are still scratching their head about a question that should have been engaging them for 60 years?
@iain
Thank you for your response.
I find it difficult to believe that it would not be a standard accounting exercise to calculate over a 30 year life of a coal fired power station:
1. the interest paid on the initial investment, total maintenance, labour costs, decommissioning costs and
2. the total power generated in that period.
The dividend is the true wholesale cost of a unit of coal generated electricity.
I was interested in the the result of the same accounting applied to a large renewable generator
@Geoff Andrews
Geoff,
1. Geoff, the way things are organised here with regards to electricity is bad. It would be nice if they could be improved. Experience shows that privatisation results in badness. It would be best if all political parties avoided privatisaton. Unfortunately they don’t.
2. If you wanted to build a new coal power plant it would cost more than building wind and/or rooftop capacity that generates the same amount of electricity. So no one will build a new coal power plant in Australia. And no one is interested in building a new coal power plant in Australia because we have massive generating overcapacity and low wholesale electricity prices.
3. When the government delibrately chooses a more expensive option they are wasting your money. Or looking at it another way, they are failing to abate as much emissions as they could for that amount of money. I’d prefer they didn’t do that.
4. I’ve never heard of an economic theory that is based on population growth. Certainly lot of people have investigated population growth and modeled it in various ways, but I don’t know of any economic theories that are based on population growth. But what would I know? I’m no economist.
PS: Bet you 20 cents peak world population is only about nine billion.
@Geoff Andrews
“I was interested in the the result of the same accounting applied to a large renewable generator”.
There is no agreed result. Your use of the term “large renewable generator” as an equivalent to a coal power station is just not something that exists in reality for a generally applicable case (outside of hydro etc). Take your pick at estimates like AEMO and factor by 1 or 2 orders of magnitude – the answer, at present, is “not economic enough to compete with fossil fuel subsidies”.
@Ronald – solar energy is not something you can relate to coal fire electricity energy, in any meaningful way, at present. Solar (as a replacement for fossil fuel electricity generation uses) is mainly useful for low quality energy uses such as solar hot water for domestic use or peak lopping afternoon electricity with pv. If, and when, temperature quality issues with solar concentrate thermal become effectively equivalent with fossil fuels, or battery technology improves to assist low EROEI pv, it will be a different discussion. But better to think of solar as a resource to assist other things like; wind, tide, geo etc. The sooner people come to this conclusion the better. The biggest issue is literacy around the measurement unit Joule, which is primarily a temperature measurement to a specific energy use case. Applying it generally – especially to energy quality issues – will give you results wildly inconsistent with reality. Have fun shooting the messenger.
Some interesting thoughts over at Our Finite World about pitfalls in renewable energy (http://ourfiniteworld.com/2014/11/18/eight-pitfalls-in-evaluating-green-energy-solutions/)
@Ronald Brak
” Experience shows that privatisation results in badness.”
This is often true but not always true. It is most often true when a natural monopoly is privatised. Networks are a good example: roads, railways, power transmission, water systems and so on. It is also true when returns on an investment have a long time frame and there are social as well as financial benefits. In this category, health, welfare and education are good examples.
On the other hand, prices of home power systems (solar plus inverter plus grid connection and/or battery back-up) are getting to the point where it makes sense to privately generate power. I mean as opposed to large centralised corporate or state generators.
There are cases where a passive, distributed collection system exceeds the efficiency of centralised production. Our water is collected by a passive, distributed collection system. The collection system in this case is the land itself. Rain falls on the land, runs to and in the rivers and is collected in dams. In a like manner, solar rays fall everywhere, collectors (solar PV panels) are now cheap as chips and can be put up anywhere. And if we can afford to build dams to collect the rainwater then by extension it seems likely that we can afford to put up heat storages to store the energy for overnight. After all, sunlight in Australia is much more plentiful and dependable than rain.
@Senexx
Gail the Actuary has strong prior beliefs that renewable energy will never work in the modern world. Of course, renewable energy did work for most of human history at least up until about 1500 AD or 1600 AD.
It is difficult to count all embedded energy in energy generation and in other production. If the stringent and extensive energy acccounting applied to renewable energy by Gail’s quoted energy experts was also applied to fossil fuels, I think now in the modern world we would likewise find a low energy profit. This is due to the depletion of the best resources first. We are now entering an economic phase where gathering energy will (again) become a bigger part of the economy. Therfore less of the economy will be able to be devoted to excess production for excess consumption (which is how our economy has worked in the oil age).
Provided we haven’t damaged the environment too much (a doubtful issue perhaps), we could at least support again say an 1100 AD lifestyle and a population of 0.3 billion. This is allowing for some very considerable environmental damage. If renewable energy proves fully viable we can perhaps run a modern world with say 3 billion people in the long run (allowing for a lot of long run damage which is already baked into the cake.) The reality is likely to lie between these levels. So a possibly medieval world again up to a decent modern world of 3 billion by say 2100 seems to be the possibility range to me. This is very speculative of course.
@iain
Ianin, rooftop solar is the cheapest source of electricity available to Australian households and small businesses. It often supplies over a quarter of total electricity use around noon in South Australia.
With regard to utility scale generating capacity, wind power is not the same as coal power, but the electricity it produces is of similar value on the wholesale market. And so new wind capacity will be built in Australia in preference to new coal capacity as it costs less.
Tim Macknay @3, Japan, or Poland in the later years of Stalinism, aren’t examples of no-growth economies. They are/were examples of growth economies that aren’t/weren’t working.
@Ikonoclast
It has only been about 250 years in which humanity has had access to energy beyond human and animal labour, with a bit of wind energy for sail ships to move about. Prior to then, we coped well enough for most things, the old Roman cities were pretty good for the citizens for the most part (for example).
It is an interesting question as to what sustainable with respect to our population for a given technological age. In one sense, there is no carrying capacity of relevance: historically, humans degrade their environment and cause species extinction. For a truly sustainable population, we would need to ensure that we stop degradation of the environment, and we stop causing species extinction, at least at the top end of the food chain. Once the big wild animals are gone, there is no getting them back.
If, on the other hand, we accept species extinction—large and small—of non-domesticated animals and plants, then the carrying capacity is that much larger; bit of a shame to only have pictures of tigers, lions, gazelles, rhinoceros, hippos, elephants, some whale species, dozens of different species of fish, worms, butterflies, marsupials, etc, instead of being able to see them in their natural habitat. Oh well, must feed the economic machine…until we can’t. What happens then is unexplained by the pro-coal lobby, the PM Abbott or his minions. What good is a planet if we can’t mine the bitch?
@Paul Norton
Yes, that is the way Japan is generally described. I’m suggesting that it might be insightful to look at Japan as an example of a post-growth economy, notwithstanding that it clearly isn’t that way intentionally.
Donald, don’t forget the: http://en.wikipedia.org/wiki/Watermill
Much older, and much more reliable output than a windmill. There were 100,000s of them across Europe by 250 years ago.
A windmill was a much fiddlier contraption requiring sail cloths etc, and which obviously only operated at the mercy of the wind. Their advantage however was they didn’t need to be built near water. You could put them anywhere.
@Ronald Brak
The ACT must be silly sausages paying $180 per Mwh from the Royalla solar farm on sunny days when you can get coal fired electricity almost any time for $40 or less per Mwh.
@Donald Oats
Note quite right;
“As early as the 13th century, coal pits were mined and coal energy was used specifically for the forcing and smelting of metals. In the 1600’s, England experienced an energy crisis due to a shortage of wood and began using coal as a substitute fuel source for domestic purposes. Even in the 1700’s, wood was the major fuel source in colonial America.
…
Steam power was developed in the 1600’s in conjunction with coal mining to help pump water out of the mines. … The first commercially successful steam engine was invented by Thomas Savery (1650-1715), an English military engineer. In 1712, this engine was refined by Thomas Newcomen (1663-1729), another Englishman. The Newcomen engine was widely used in Britain and Europe throughout the eighteenth century, but had very low energy efficiency.” – Carnegie Mellon, History of the Energy System.
So, to go without all modern energy sources and fossil sources and wood (since many great forests are gone) would put us back in the middle ages.
I nominate Robinson Crusoe.
Thanks Nick and Ikonoclast for correcting me: self-facepalm at my own laziness in not looking a few things up first. Watermills were certainly in widespread use in some places, as were windmills.
The comment about a shortage of wood being a driver for using coal as a fuel for domestic use is intriguing; I hadn’t realised that wood was in such low supply that long ago. Wow.
If I remember rightly, the Romans suffered wood shortages in the Mediterranean much longer ago than that. I think it was actually a big contributor to the downfall of the empire.
Remember as well the machine age really got moving after the plague years in the 14C. In short, there wasn’t enough manpower left. Hence the appeal of machines to do the work instead.
@Donald Oats
The rolling barrenness of Greenland derives from clearing by Vikings. The ‘natural’ heaths of Ireland and Scotland resulted from English clearing forest for smelting. Nature has a history, most often of being shaped by human activity and then being accepted in later ages as ‘natural’ The treelessness of the Mediterranean basin, as Nick says, is an artefact of empire.
@jungney
There’s an echo of that sentiment in the Lord of the Rings movie in which the evil wizard is clearing the forests to suck out their life and build his power over the humans and other creatures.
It’s a compelling metaphor, its sentimentality notwithstanding.
@Fran Barlow
Absolutely. I read the book as a young teenager while making a series of long bushwalks across and around about Barrington and Gloucester Tops National parks. One of the distinctive features of the alpine area are the moss dripping, ancient Antarctic Beech forests interspersed by open alpine swamp and meadows. So, the book informed my politics in ways that Tolkein would not have imagined because the yank’s spraying of Vietnam provided my most enduring memory of the defoliation was footage of the spraying; the spraying images came to symbolise the war.
It occurred to me that there might be something wrong with western culture 🙂
Oh dear heavens
should read, I don’t know why I keep employing these fingers:
“So, the book informed my politics in ways that Tolkein would not have imagined because the US was defliating Vietnam and it was a nightly event on the teev”
Pardon me.
@Fran Barlow
The hobbits had “a love of all things that grow”. Saruman had a “mind of metal and wheels”. It’s a consistent theme of Tolkien’s middlebrow and semi-flawed masterpiece that it is better to live in harmony with the natural world and keep it green. Isengard becomes a mini-Mordor when Saruman rips down its trees and later moves onto desecrating the margins of Fangorn. Mordor itself, in its north-west regions, is one vast slag heap.
Tolkien also puts forward the notion that there are many forms of life that live according to their own ways independently of man and that these forms are important too. The world loses something when these forms of life pass or crumble like the great forests of former ages and all their denizens. It does have a lot of applicability to the modern world. Tolkein preferred “feigned history” with its general “applicability” giving the reader freedom to interpret. He preferred this to allegory with its tight one-to-one correlations which are imposed by the author on the reader.
Anatolia was heavily forested 3000 years ago. So was the Iberian peninsula until the (re)discovery of the Americas. (interesting review in the article “Historical and recent changes in the Spanish forests: A socio-economic process”).
I wonder what Australia will look like in 100 years. At our family property near Orange, NSW, there are only two self-germinated eucalypts on 10 hectares of excellent volcanic soil. Trying to establish new trees is an uphill battle, with drought, beetles and rabbits taking their toll, and almost impossible to imagine being self-sufficient for heating purposes within the next 25 years.
Many advances in windmill technology came from Holland pumping their wetlands dry after 1400.
@Hermit
Hermit, I think they were silly not to install the solar capacity on rooftops which delivers electricity to the consumer at a lower cost than utility scale generating capacity including paid off coal plants. However, I believe they were motivated by a desire to kill fewer babies and I can’t fault that. I’m just glad that no one would ever suggest that the costs of the ACT Royalla solar farm are typical of the cost of solar in Australia because that would be dishonest.
Trees are over-rated. What use are they, honestly? In a paddock they just get in the road, and along my nice asphalt city lane the trees drop leaves and that brings out the dreaded council leafblower man. And people use them for shade and congregate, making the place look untidy. Birds alight on them and twitter (or is it “tweet”?) first thing in the morning, little puff-balls of phosphate expelling machines that they are. Not to mention that eerie sound they emit whenever the wind is up. Yep, feral trees are a menace.
Which in no particular way brings me to FDOTM’s wind turbine enquiry cartoon, a must see.
You might find this interesting Ronald
http://bit.ly/1q9lJ95
@Ronald Brak
Perhaps the 83,000 panels at Royalla should have been divvied up and put on the roofs of ACT and Queanbeyan battlers under some pay-later arrangement. Even without a RET wind and solar now have some natural advantages. With a rising gas price wind power saves running high opex gas plant at higher capacity. For solar at the users premises it partly displaces buying grid electricity at retail rates i.e. it eliminates the middle man. Royalla reintroduces the middle man.
Interesting, plaasmatron. I didn’t know that about Holland.
http://en.wikipedia.org/wiki/Kinderdijk
The things you learn 🙂
A (presumed) Christian was arrested for threats to the life of Dennis Napthine a few days ago .Had he been a Muslim it wold have been a week of front page news about terror plots.
Just a reminder -the often said ‘ plots to blow up the MCG’ were not substantiated by the court. There was no specific plot or means to carry it out. People did go to jail tho.
Re: Earths carrying capacity and Humanities impact on the world. Biologically we are hunter gatherers -its only been the last few tiny moments of our evolution when all the other stuff happened. H G life was not perfect -they wiped out mega fauna, changed ecosystems and ,like us, had some brutal customs .However there is lots of evidence that they were physically and mentally healthier than we are now. In many ways it was the agricultural revolution when it started going wrong for us .Suddenly we could sustain much larger populations – of sicker individuals. There was no turning back.
@Fran Barlow
Thanks Fran, that was interesting. It is one more example of those involved in utility scale generation attacking point of use solar because they don’t like the competition. We’re lucky in Australia that rooftop solar got as far as it did before too many knives were drawn. And we’re unlikely to see much more utility scale solar in Australia once the current, small by by world standards, projects that are underway are completed thanks to rooftop solar lowering electricity prices during the day. Adelaide is completely overcast at the moment but rooftop solar is probably still supplying 8% or more of total electricity use here at the moment.
@Hermit
Hermit, however it was done, it certainly would have made more sense economically to put the PV capacity on roofs.
Select SA on this website http://empowerme.org.au/market.html#
Wind, gas and brown coal are currently supplying power in roughly equal proportions. However when Moomba gas goes into Gladstone Qld LNG mid 2015 I would expect more imports of brown coal power from Victoria.
Why don’t they build a nuclear plant to replace all coal and some gas? After all SA not only had atom bomb tests in the 1960s but they also have a third of the world’s easily mined uranium. The N-build project might also deflect SA’s submarine and car manufacturing woes.
@Hermit
That’s an interesting link you provided, Hermit. How do they determine demand? They have it at over 2,000 megawatts in South Australia at the moment. And they have 6:30 as minimum demand, the off peak hot water spike isn’t visible and I’m afraid it doesn’t really make sense at all.
The economic reason why South Australia does not built a nuclear power plant is because it is more expensive than other methods of generating electricity, including gas. Also note that South Australia spends a great deal of time burning very little gas on account of how it is expensive. And I don’t see how an increase in electricity prices that would result from nuclear power would help ship or car manufacturing. Rather, South Australia’s wind and rooftop solar capacity has been quite effective at lowering wholesale prices and so have probably reduced the cost of electricity for large industrial users in the state. (It is not uncommon for contracts to large industrial users of electricity to be tied to spot prices, although I am not aware of the details for South Australia.)
@Ronald Brak
Sorry, the hot water spike is visible, but doesn’t seem large enough.
@Ronald Brak
Do they really think South Australia is burning diesel in a peak power plant on a windy 26 degree day? How bizarre.
Malcolm Turnbull has been out and about, defending PM Abbott’s pledge of no cuts to the ABC, no cuts to SBS: the defence is that Turnbull and Hockey had been stating their would be efficiency and productivity savings sought, and that they were saying these things in the lead up to the election. So far, I have not heard a TV journalist confront Malcolm Turnbull by pointing out that PM Abbott’s pledge was an unequivocal statement made after Hockey and Turnbull’s statements, and that as the opposition leader at the time, Tony Abbott’s statements should obviously trump what had gone before. I mean, he made the pledges on national TV the day before the bloody election! Malcolm Turnbull has disgraced himself by expecting us to buy into some mythical alternate reality in which just because someone says something and does the exact opposite, doesn’t mean it’s not true. Yeah, right, and I’m a billionaire because I believe I am…nup, reality doesn’t work that way, Malcolm.
As far as I’m concerned, when even Malcolm Turnbull is willing to take the piss out of us mug voters on something as significant as these cuts, then this government is illegitimate and does not deserve to stay in power. None of them seem to feel the need for some measure of honesty with us: if people enjoy the principle of democracy, then surely this intractable dishonesty is as vicious an insult to that principle as you can get. Where are the protest marches?
I think it was Malcolm who said that any organisation that couldn’t absorb a 5% budget cut wasn’t worth its salt. Lets start with the Australian parliament. I’m pretty sure we could cut their budget by 5% and it would be a lot less noticeable than cuts to Aunty.
@Ronald Brak
BREE thinks the levelised cost of large nuclear and combined cycle gas will be about the same after 2020. See their AETA publication which has various assumptions about gas prices, carbon tax, renewable energy certificates and so on. These assumptions are all rubbery.
I suspect SA is finished as a manufacturing centre unless Canberra sends business their way regardless of cost. Up to 13,000 direct and indirect jobs are expected to be lost when Holden up stumps. There’s thousands more at the Australian Submarine Corporation unsure of their fate. I suggest SA get into the nuclear fuel cycle in big way not only expanding the current uranium mining but also enrichment and nuclear power generation for local use and interstate export. It’s their best shot.
@Hermit
Hermit, do you have any idea where the empowerme site you linked to got their information from, because it certainly appears to have been made by crazy people.
@John Brookes
So is an organisation that ‘absorbs’ a cut of 5% in 2015 still worth its salt a year later? Surely if the maxim is sound then the answer must be yes. How many years will it remain sound? Presumably, indefinitely.
So 25 years from now, the ABC will function just as well on what I spend on groceries each year?
You know it makes sense.
me -> 8======D~~~~ O: <- John