Discussing Energy Economics on the Internet

Severn Short List Published

Posted in Renewables,UK by Cheryl Morgan on the January 27th, 2009

The UK government has published a short list of 5 projects it is considering for extracting energy from the Severn Estuary. Included on the list is the option of a gigantic barrage stretching from Cardiff to Weston-super-Mare. The other projects are for smaller barrages and for tidal lagoons.

The large barrage project is opposed, not only by environmentalists, who fear the destruction of much wetland habitat, but also by the port of Bristol which has plans to develop a deep water container terminal – a project that would be a non-starter if the barrage prevented shipping from traveling into Bristol.

Judging by the local news last night, many people feel that the government has already made up its mind which project to back, and the consultation over the short list is a just sham to keep protesters happy. It is easy to see why. The big barrage will generate massively more energy (up to 8GW) and the tidal lagoon system favored by environmentalists are less proven technology.

Further coverage is available in The Guardian and The Times. A BBC Wales video with graphics showing the sites is available here.

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Save the Planet – Only €530 billion

Posted in Climate by Cheryl Morgan on the January 27th, 2009

That’s the opinion of McKinsey anyway. And given that many scientists and environmentalists are already saying it is too late to prevent a disaster, that’s a bargain.

Perhaps more significantly, the McKinsey report estimates the cost of action to abate climate change to be less than 1% of global GDP. That compares to an estimate of 20% of global GDP that the Stern Report suggested the impending disaster would cost.

Of course, no one really knows. Doubtless the doom mongers will already be lining up their complaints. But doom mongering rarely begets action. Perhaps what politicians need is exactly the sort of upbeat, positive message that McKinsey is pushing.

You can find the whole report here, or there is a summary on EurActive.

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Introducing Irena

Posted in Germany,Renewables by Cheryl Morgan on the January 26th, 2009

At a conference in Bonn today a new international energy association will be founded. The International Renewable Energy Agency (IRENA) is a German initiative supported by a number of other European countries including Denmark, Spain, France and the Netherlands. According to its web site:

IRENA aims at becoming the main driving force in promoting a rapid transition towards the widespread and sustainable use of renewable energy on a global scale.

Which is all very fine and noble. Many developing countries are keen to participate. Those that have promised to sign up include Vietnam, Paraguay, Mali, Ethiopia and Eritrea. However, major energy consumers such as the USA and China appear to be less keen on the idea (membership fees are means-tested, so larger countries would have a fairly hefty bill). And according to The Guardian the UK is rolling out the usual “if the big boys aren’t playing we won’t either” excuse.

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More on EU Carbon Prices

Posted in Climate,Emissions Trading by Cheryl Morgan on the January 22nd, 2009

Sandbag has another article up, citing this Reuters article in support of the claim that the Emissions Trading System is proving windfall profits for European generators.

Meanwhile at Knowledge Problem Mike Giberson argues that clean energy projects in the developing world are just another industry and it doesn’t matter whether they get funded or not.

I particularly liked this point from the Sandbag article:

I have long believed that Europe took a wrong turn when it embarked on a unilateral emissions trading scheme that covered industries whose products are priced in a global market. It was always going to result in fierce lobbying and inevitable political compromise. Had they decided to stick with the large sectors like electricity, which cannot move and are not exposed to international competition, they would have been able to proceed with much more ambition and clarity of purpose.

Of course letting some industries off the hook would have infuriated those environmentalists who are are more interested in ensuring that the “bad guys” get punished than in fixing the climate change problem. For the rest of us, however, the issue ought to be “will it work?” If we are going to have masses of new government subsidies and regulations to save the planet, the #1 priority has to be whether those measures will work or not.

The same applies to clean development. Governments in rich countries should be subsidizing such schemes in order to help combat climate change, not just to boost exports. If a collapse in carbon prices means such schemes don’t get off the ground (and developing countries choose to burn coal instead) then we have a problem.

Of course all of this assumes that economies and ecosystems can be “fixed” by government intervention. As Lynne Kiesling points out, that is easier said than done.

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Iberdrola & SSE Go Nuclear

Posted in Nuclear,UK by Cheryl Morgan on the January 22nd, 2009

It seems like EdF will not have it all its own way in the expected bonanza of nuclear plant production in the UK. According to Energy Business Review, Iberdrola and Scottish & Southern Energy will be setting up a joint venture with a view to building their own nuclear plants.

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Thoughts for Mr. Obama

Posted in USA Federal by Cheryl Morgan on the January 21st, 2009

With a new national energy policy being formulated for the US, everyone wants to have a say in shaping it. EU Energy Policy has an extract from one such effort by Paul Joskow. If you are interested in the detail it is probably better to read the whole paper.

Not Easy Being Green

Posted in Emissions Trading,Europe,USA Federal by Cheryl Morgan on the January 19th, 2009

It seems like it is open season on emissions trading schemes at the moment. Over at the Wall Street Journal they are reporting on the hail of fire descending on the U.S. Climate Action Partnership over their blueprint for government action. Meanwhile Sandbag is having at go at the EU’s scheme in the light of the current rapid collapse of carbon prices in that market.

Much of the USCAP criticism appears to be politics as usual. Business interests will carp over anything that costs them money, consumer advocates will rail against anything that puts up prices, and environmentalists will complain that anything that doesn’t hurt businesses and consumers is an outrage. The fact that it is being shot at by all sides suggests that USCAP might actually have hit the middle ground. But that doesn’t mean that their scheme will work.

Europe’s problem is altogether different. Whatever scheme a government comes up with will be unpopular with someone. However, if a carbon trading scheme ends up with a very low price for carbon then it is very clearly not doing its job, no matter how happy some people might be about that. The objective of a carbon trading scheme is to reduce emissions by making them expensive, and if it doesn’t do that then it is pretty much just creating jobs for consultants and IT people.

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Another Hopeful UK Retailer

Posted in Retail,UK by Cheryl Morgan on the January 13th, 2009

Platts reports that a new entrant to the UK’s retail electricity and gas market is offering the lowest duel-fuel deals around, undercutting the “big six” incumbent suppliers.

Well they would have to, wouldn’t they. But will they survive? The UK’s retail energy market has a long history of consolidation by incumbents and failures by new entrants. First:utility will need to have something special to offer if they are to survive in a market where economies of scale are everything. Looking at their web site, it appears that their edge is intended to come from smart metering and encouraging demand management on the part of their clients. Presumably that means that they’ll be able to buy more baseload power and less peaking power than their rivals, hence the lower average charge.

We shall see. I wish them luck, but it is a tough market. Their biggest challenge might be to convince potential customers that they are not going to be out of business this time next year.

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EIA Accused of Anti-Renewables Bias

Posted in Wind by Cheryl Morgan on the January 9th, 2009

Energy Watch Group, a German-based renewables advocacy organization whose membership includes a number of German and Swiss politicians, has published a new report on the wind power industry. The report is particularly critical of the Energy Information Administration, and pulls no punches. This:

We conclude by saying that the IEA Outlook remains attached to oil, gas, coal and nuclear, and renewables seem to have no chance to reverse this trend. This organization, whose constitutional task would be to protect consumers from price hikes and to deliver energy security, has been and is deploying misleading data on renewables for many years.

Is followed by this:

One has to ask if the ignorance and contempt of IEA toward wind power and renewables in general is done within a structure of intent. Renewables tend to look ever expensive and close to irrelevant while oil, coal and nuclear look irreplaceable in the IEA World Energy Outlook reference scenarios. Is it this message that big companies and US presidents need to fight a war for oil, subsidies and profits, disguised as a “war on terrorism”.

(Our emphasis.)

Strong words indeed. You can find the whole report here, and a summary of the controversy in The Guardian.

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UK Wind Farm Under Attack?

Posted in UK,Wind by Cheryl Morgan on the January 8th, 2009

Something or someone has caused massive damage to a turbine at a wind farm in Lincolnshire. As can be seen from the photo in this Guardian article, one blade is missing altogether, and another is badly bent.

Dale Vince of Ecotricity, the company that owns the wind farm, is baffled. “To make one of these blades fall off, or to bend it, takes a lot,” he said, adding, that is something hit the turbine it was, “probably the size and weight of a cow.” While metal fatigue and similar explanations are being investigated, the idea that is getting most traction in the UK media is that the turbine was hit by a UFO.

This is clearly a big setback for the wind industry. It is bad enough being attacked by environmentalists, but aliens too? Do they know something that we don’t? What I really want to know, however, is what the Lincolnshire police were up to. There’s a clear case of DUI here, and someone needs to catch that UFO driver before he causes any more accidents.

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