Discussing Energy Economics on the Internet

The Economist on Energy

Posted in Renewables by Cheryl Morgan on the June 20th, 2008

The latest issue of The Economist contains a long Special Report on The Future of Energy. Written by the paper’s science editor, Geoffrey Carr, it takes a look at where the energy industry might be headed in the next decade or so. Mr. Carr has a good grasp of the fundamentals of electricity generation and applies that knowledge to a survey of the activities of venture capitalists and research departments in major corporations to try to discern where our industry might be headed. Partisans of particular solutions to current industry issues will doubtless disagree with some of his findings, but the general tone of the report is reasonable and promises interesting times ahead.

One of the major thrusts of the report centers around what has become known as the “Google Equation” (RE<C); that is the holy grail of renewable generation – to provide electricity more cheaply that coal-fired plants. Carr is bullish about solar and wind. He’s accepting of the inevitability of a nuclear renaissance. He is cautious about the prospects for geothermal power, and dismissive of wave and tidal generation. In other areas he is scornful of the prospects for carbon storage, and favors electric cars over fuel cells.

A specific economic issue that Carr addresses is that of subsidies for renewable energy. He quotes former CIA chief, James Woolsey, as estimating that US oil companies “receive preferential treatment from their government worth more than $250 billion.” Carr also notes that including the cost of environmental damage via a carbon tax or trading scheme would add significantly to the price of coal and gas-fired generation.

One particular item that is likely to get people to sit up and take notice is in the section on electric cars. Carr notes that electricity can provide the same amount of power as a liter of gasoline at a cost of just 25 cents. Obviously there are issues with battery life which mean that electric cars are not suitable for journeys of more than around 50km, but for city use they are becoming increasingly attractive. And, as Carr notes, they provide a perfect answer to the long standing question of what to do with generating capacity during the overnight trough.

One area that Carr sidesteps is politics. For example, he talks enthusiastically about the possibilities for new, long-distance transmission lines bringing power from the sunnier and windier parts of the world into cities where it is needed. He doesn’t consider whether such lines can ever be built, given the usual pubic outrage that plans for new transmission generally provokes.

Overall, however, the report provides a useful introduction to the many cutting-edge technologies that are currently hoping to win a major slice of the world energy industry. It also provides reasonable hope that the long-awaited renewable energy revolution is indeed about to happen.

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