Greening and de-industrialisation

This is a very quick post, but I could not help but comment on this snippet I saw on Watts Up With That. The snippet refers to a full article that can be found at the Global Warming Policy Foundation, which is a translation of an article from a German newspaper (a long explanation of source, sorry). Below are some key quotes from the article, which are all referring to the ‘green’ energy policies adopted in Germany:

Today it is obvious that Merkel has promised too much. Energy prices in Germany are increasing dramatically – by 57 percent in just the past ten years – and not least because the state is one of the biggest drivers of cost. Taxes and duties on electricity prices have now risen to 23.7 billion Euros p.a. – an increase of just over 1,000 percent within 15 years. The levies on electricity look more like a special energy tax, which is higher than the revenue from tobacco and motor vehicle taxes combined. [and]

German industry, in particular, is suffering from high electricity prices. Most affected are the chemical, metal and paper industries. In the aluminium industry, the electricity costs amount to about 40 percent of total costs.

All industries complain; some companies have already closed down: the aluminium smelter Voerdal in the Lower Rhine town of Voerde recently filed for bankruptcy because of high energy prices. The U.S. chemical giant Dow Chemical currently operates 17 plants with more than 5,000 employees in Germany. “Because of the green energy transition I get increasingly critical questions from our corporate headquarters in the US about whether energy supply in Germany is still possible at competitive prices,” said Germany boss Ralf Brinkmann. [and]

“The de-industrialization has already begun,” Energy Commissioner Guenther Oettinger has warned in an interview with the Handelsblatt. Hans Jürgen Kerkhoff, President of the Steel Trade Association, complains: “The levels of industrial electricity prices are higher here than in most other countries.” [and]

It is really not complicated. If you increase the cost of energy, the more intensive the energy user, the more likely they will decamp to another location. Of course, this means no net decrease in the amount of carbon dioxide, as this is just a displacement of activity. It just means that one country’s de-industrialisation is another’s industrialisation.

The question is; is this what we want for New Zealand? The cost is pain for both business and households. More to the point, even where there is the possibility of potentially less expensive ‘green’ energy, fanatics such as the Green Party still seek to block the alternatives. The timing is perfect but the outcome is laughable. Just after I read the German article, I found this on the Climate Conversation Group, in reference to a proposed Meridian hydro electric project in New Zealand:

On the surface, this is an example of the extreme green position. Don’t touch the earth, don’t change it for any reason, never mind the benefits. Never mind that we have no other resources (there’s just the one planet, you know), but we can’t use these resources, because we’ll kill a few snails.

The Green Party is crowing about this victory, which is fair enough, but it says all rivers should be protected. This is wrong. The Mokihinui might have special qualities that deserve protection, but it would be anti-human to deny access to all rivers.

The Greens have campaigned against the use of the river for ‘renewable’ energy, in order to protect wildlife. At the same time they support the massively expensive use of wind and solar energy. What do they really want? The answer, in the end, is de-industrialisation. They never say it, but it can be the only outcome of their policy and approach. We can see the results in Germany. It takes time to start the de-industrialisation, but once started, it is hard to reverse. After all, once the companies are gone, are they likely to come back? The skills and knowledge to compete in the sector are lost, and hard to revive.

It really is time to wake up to the damage that so-called green energy policy will do. De-industrialisation can be the only outcome of an expensive energy policy, and this is what the Green Party, and their supporters, are pressing for in New Zealand.

Note: I have not looked at the economics of the case of the hydro-project, but am guessing that it would provide cheaper energy than wind/solar. However, readers should be cautious that this is no more than a guess. I would review the case but am short of time, and am guessing that the Climate Conversation Group were aware of the background for their post.

A Great Energy Solution

What is the reaction to a cheap and plentiful source of energy? Is the world raising a cheer, are we celebrating that one of the great inputs into making our lives might be made cheaper and enhance everyone’s prosperity. Strangely enough, no. The source of energy is natural gas, and the process of fracking is a relatively new method to tap into huge new sources of natural gas. If you are unfamiliar with fracking, this is a neat summary from Wikipedia:

Hydraulic fracturing is the widening of fractures in a rock layer caused by the high-pressure injection of chemicals with water. Hydraulic fractures form naturally, as in the case of veins or dikes, and industrial fracturing widens or creates fractures to speed up the migration of gas and petroleum from source rocks to reservoir rocks. This process is used to release petroleum, natural gas (including shale gas, tight gas and coal seam gas), or other substances for extraction, via a technique called induced hydraulic fracturing, often shortened to fracking^[a] or hydrofracking.^[1]

I thought I would cover fracking as a topic as I received an interesting comment from ‘Andy’ on a recent post on wind-energy, which linked to an article as follows:

A $1.6 billion wind farm – the country’s largest – has been given the go-ahead to be built in Wairarapa.

Genesis Energy’s Castle Hill Wind Farm will dot hillsides throughout northern Wairarapa with up to 286 turbines and provide power for up to 370,000 homes.

It is all very dispiriting, as it means that electricity in New Zealand will, as time progresses, become ever more expensive. Wind-energy is just useless, wasteful and expensive, and we will eventually see this in the cost of our electricity bills, and the closure of energy intensive businesses that can move overseas. In consideration of the size of the population, New Zealand is blessed with commodities, including the possibility of large reserves of oil. However, to add to this mix, there is the possibility of major sources of natural gas becoming available, if only fracking continues to be allowed to be developed in New Zealand.

Up to now, I have been cautious about commenting on this new source of energy, as there have been some controversies over the use of Fracking. In particular, questions have been raised about the possibility for fracking to cause seismic disturbances and groundwater contamination. However, as time has moved forwards, it seems that, though not perfect, fracking is a reasonably safe and cheap way to access energy. However, this portrayal does not match up with that given by the ‘green’ lobby, who would rather see useless windmills built at huge cost to the economy and to individuals when they pay their electric bills.

So what of the potential. Well, surprisingly enough (or perhaps not), it was very hard to find any articles that actually detailed the potential reserves of shale gas in New Zealand, with nearly all of the articles focusing on the controversy surrounding the extraction of the gas. I eventually dug up a very brief article that says the following with regard to reserves:

Amidst opposition from local environmentalists, permits have been approved for hydraulic fracturing on 4,406,400ha of New Zealand land and another 3,065,500ha is up for consideration, Rigzone reports. L&M Energy believes its plays on the South Island may contain more than 5 trillion cubic feet of gas. Could New Zealand join Australia as a potential shale gas supplier to the south east hemisphere?

The really curious thing about my search was how hard it was to find this information, and the lack of discussion of the potential benefits for New Zealand’s economy in general, or the benefits of cheap energy for both individuals and business. Instead, the major focus is on the environmental risks. The chart below shows the most obvious benefits the shale gas revolution has brought to the U.S.

Perhaps it is stating the mindlessly obvious, but when massive new sources of a new commodity become available, it becomes incredibly cheap. In this case, it is energy that is becoming much, much cheaper, and the result is that this is a boon for any economy. Instead of a celebration for the potential for cheap energy, we instead have hand-wringing about the ‘risks’. As such, it is worth looking at the risks, and I will hand over to Matt Ridley for his commentary on a recent (very ‘green’ oriented) UK government report:

It is now official: drilling for shale gas by fracturing rock with water may rattle the odd teacup, but is highly unlikely to cause damaging earthquakes. That much has been obvious to anybody who has followed the development of the shale gas industry in America over the past ten years. More than 25,000 wells drilled have caused a handful of micro-seismic events that can barely be felt.

The two rumbles that resulted from drilling a well near Blackpool last year were tiny. To call a two-magnitude tremor an earthquake is a bit like calling a hazelnut lunch. Such tremors happen naturally more than 15 times a year but go unnoticed and they are a common consequence of many other forms of underground work such as coalmining and geothermal drilling.

The use of the word ‘earthquake’ is one which sounds very scary, but the disturbances caused by Fracking are minimal, and when we compare this to the potential and rarely mentioned benefits….

As for the contamination of groundwater, perhaps the most infamous scare came out of the US:

Yet, a small cabal of special interest groups opposes the resource and, consequently, has sought publicity to spread their dubious beliefs. Case in point: a scene from the upcoming documentary Gasland, which features a man lighting his faucet water on fire and making the ridiculous claim that natural gas drilling is responsible for the incident. The clip, though attention-getting, is wildly inaccurate and irresponsible.

To begin with, the vertical depth separation between drinking water aquifers and reservoir targets for gas production is several thousand feet of impermeable rock. Any interchange between the two, if it were possible, would have happened already in geologic time, measured in tens of millions of years, not in recent history.

The only way that drilling could have caused communication is through the vertical well bore itself which is cemented and cased. Millions of wells have already been drilled throughout the world, of which only a handful have experienced accidental leaks into water aquifers– a percentage smaller than a person’s chances of being struck by lightning in fact. In the rare instances of a leak to the surface, energy companies alert and voluntarily evacuate residents while the safety of the site is evaluated.

This has not prevented the Gasland story from being repeated in New Zealand, as in this story from the New Zealand Listener:

The documentary movie Gasland popularised these concerns with graphic images of residents holding cigarette lighters up to their running taps, causing the water to explode in a ball of flame. Many recounted stories of illness in their households, and sick and dying animals. Some said their water had turned brown and smelt foul, and they were forced to truck in water after their wells were ruined.

Please do not get me wrong. Any commodity extraction process has potential risks, but these risks have to be considered in relation to the benefits. Cheap and plentiful energy is a major benefit, but the risks involved in fracking are vanishingly small. The problem is that, as in this New Zealand Herald article on a government enquiry into fracking, there is a lack of clarity on what rewards and risks are involved (my emphasis added):

In an energy-hungry world, there is a clear case for the practice if it embodies no environmental threat, or risks that can be comfortably contained. Much of the evidence overseas points to this not having been the case when regulation of the exploration industry was weak and fracking was done incorrectly. This is the area where Dr Wright’s investigation should shed most light.

The interesting point is that of ‘no environmental threat’, albeit followed by a less strong position. All resource extraction has potential risks, but the entire world relies upon resource extraction. Whatever the resource, there are risks to the environment. Even the wind-farms given hallowed status by ‘greens’ are responsible for huge numbers of bird deaths, not to mention the poor people who live near them who are driven mad by the noise, or the occasional dangerous collapses of individual turbines, or the concreting over of land etc.

The most worrying aspect however, is that the anti-fracking movement is led by Greens, as well as ‘renewable’ energy lobbyists. Again, I hand over to Matt Ridley:

Most of the opposition, though, has come from those with a vested interest in renewable energy, including the big environmental pressure groups, which are alarmed that the rich subsidies paid to wind, biomass and solar may be under threat if gas gets too cheap and cuts carbon emissions too effectively. Their entire rationale for subsidy, parroted by their dutiful poodle Chris Huhne, when Energy Secretary, is that gas would get more expensive until even wind and solar looked cheap. That was wishful thinking.

Notwithstanding his use of ‘carbon emissions’ when he must surely mean carbon dioxide, he makes a good point. There are now powerful lobby groups that see fracking as a threat to their own industries. Add to this the green lobby view that anything that might improve our lives or any resource extraction is ‘bad’, and we have a toxic mix. It is a toxic mix which seems to be working, as the news about fracking seems to relentlessly focus on risks rather than rewards. This sits in stark contrast to the discussion of wind-energy, which is paraded as a universal positive, without reference to the environmental damage, or without reference to the huge costs that will be borne by all of us.

In short, sure there are some small risks, but what about the huge benefits?

Note: Apologies for a slightly clunky delivery of the post but I am pressed for time, but still wanted to get something out on the subject.

The Madness of Wind Energy

It did not take me long. Typing ‘wind energy’ into the New Zealand Herald search box produced a string of ‘hits’, including this from a piece about Genesis Energy:

While Genesis began seeking resource consents for a major new wind farm in the Wairarapa, called Castle Hill, during the period, it considers the market is currently “saturated” with new generation proposals that will more than meet weakly growing electricity demand in the near future.

Yes, like many others in the world, New Zealand is rushing down the wind energy route, and doing so in the face of a mounting body of evidence that this route is  a complete waste of money.

One of my earliest posts on the blog was a discussion of the utter uselessness of wind energy, and you may want to take a look at it. It gives an analogy which explains the uselessness of this method of energy production in simple terms. More recently, I posted on a Civitas (a UK ‘think-tank’) report on wind energy, which slammed both the economics of wind power, and the ‘green’ credentials of wind power. As it is, a new report has been released by the Global Warming Policy Foundation (GWPF). It is written by an Economics Professor, Gordon Hughes, and points out the same problems with wind energy that can be found in my earlier post and the Civitas report. I will quote from the forward of the report:

The total consumer bill for wind subsidies by 2030 is estimated to amount to a staggering £130 billion. A recent analysis of UK wind farms revealed that a dozen of the biggest landowners will between them receive almost £850 million in subsidies, a huge amount of funding that will be paid by ordinary
families through hidden taxes on their household electricity bills.

The forward notes that these huge expenses and subsidies have been hidden from the consumer. As is always the case, Hughes identifies that the fundamental problems with wind (and many other sources of ‘renewable’) energy is the intermittent nature of the generation, which means that back-up generation capacity is needed for the wind farms. The report also questions whether the use of wind farms will even reduce CO2 emissions, which is one of the fundamental reasons that wind energy has been promoted so heavily, and is in receipt of so much subsidy. If you have ever wondered about the economics of wind generation, I strongly recommend reading the report in full, or at least reading the summary.

The report goes against one of the great green causes, and it is therefore no surprise to see the limited coverage of the report in the press. I found no coverage in a search of Stuff, but a Google news search found coverage in several countries, also including this from The Australian:

The British study warns of the rising cost to consumers of wind power subsidies on the grounds that governments could achieve the same environmental benefits by other means at much lower cost.

Comparing a pound stg. 13 billion ($19bn) outlay on a combined-cycle gas plant against a pound stg. 120bn outlay on wind farms, Professor Hughes found the renewable energy option was too expensive by any standard.

Wind power would cut emissions at an average cost of pound stg. 270 a tonne, he estimated, but meeting Britain’s greenhouse targets in this way would cost about pound stg. 78bn a year or 4.4 per cent of the nation’s GDP.

Note the last figure for the cost in GDP. To say that this is complete madness would be an understatement. As the report in the Australian points out, wind characteristics may vary between countries, making direct comparisons difficult, but the principles of the study carry over. I therefore have several questions about wind power in New Zealand:

1. What is the real cost of wind energy in New Zealand, including indirect subsidies of wind power?
2. How much is this going to cost businesses?
3. How much is this going to cost consumers?

It may come as no surprise to find that the New Zealand Wind Energy Association has given a report arguing that wind power is a wonderful solution to New Zealand energy requirements. However, as is always the case with such reports, and as is pointed out in both the Civitas and GWPF reports, the pro-wind energy reports all have in common that they make completely unrealistic assumptions. As it is, the report was criticised by the New Zealand Climate Science Coalition, in a press release that can be found here:

“The report uses an economic model of New Zealand which is totally unsuited to analysing the effect of 20% energy generation from wind. Any model that does not take into account the intermittent and seasonal nature of wind and its effect on power prices and the fact that, in a dry year, hydro cannot backup wind, is worthless. The model makes no allowance for the fact that over peak demand periods, only about 10% of the wind generation can be relied on. It also does not consider the need for extra transmission lines and the poor efficiency of the gas fired power stations that must be built to back up wind. For example, one study in the United States showed that, in Texas, a large amount of wind energy results in a tiny reduction in carbon dioxide emissions.

“This flawed report reflects little credit on the Infometrics and on the New Zealand Wind Energy Association. It does not alter the fact that wind is expensive, requires backup, and has only a small effect on reducing emissions of carbon dioxide–which is, in any event, an entirely beneficial gas that causes plants to grow,” Mr Leyland concluded.

Notwithstanding this critique, where is the debate on wind power in New Zealand? Where is the equivalent of Civitas? The UK is slowly waking up to the idiocy of wind power, with this from Matt Ridley in the UK’s Spectator:

Even in a boom, wind farms would have been unaffordable — with their economic and ecological rationale blown away. In an era of austerity, the policy is doomed, though so many contracts have been signed that the expansion of wind farms may continue, for a while. But the scam has ended. And as we survey the economic and environmental damage, the obvious question is how the delusion was maintained for so long. There has been no mystery about wind’s futility as a source of affordable and abundant electricity — so how did the wind-farm scam fool so many policymakers?

One answer is money. There were too many people with snouts in the trough. Not just the manufacturers, operators and landlords of the wind farms, but financiers: wind-farm venture capital trusts were all the rage a few years ago — guaranteed income streams are what capitalists like best; they even get paid to switch the monsters off on very windy days so as not to overload the grid. Even the military took the money. Wind companies are paying for a new £20 million military radar at Brizlee Wood in Northumberland so as to enable the Ministry of Defence to lift its objection to the 48-turbine Fallago Rig wind farm in Berwickshire.

Wind energy is not a small issue. It is, in fact, an issue that can have profound and serious impacts upon every New Zealand family, and every New Zealand business. Look again at the figures for the cost of wind power in the UK, as measured in GDP. If the cost of New Zealand’s wind energy is even as low as half of the UK figure, it is an issue that impacts the whole of the New Zealand economy.When is New Zealand going to wake up from this madness that is so economically ruinous?

What really worries me is that there appears to be no will to take on anything which has a ‘green’ label attached to it. It is a situation in which no politician dares to go against anything that might be seen as anti-green. As such, rather than taking on a ‘green issue’, I suspect that the New Zealand politicians will remain silent, and allow this economically mad and economically ruinous policy of encouraging wind energy to continue.

More on Wind Power

I have posted a few times on the use of wind power (here and here) and a new report from the UK think-tank Civitas, adds fuel to the fire of cynicism about the utility of wind power. However, before looking at the problems of wind power, it is notable that they provide estimates of the increases in power costs of the UK’s green energy legislation, with different estimates based upon fossil fuel prices. I will provide the central estimates here:

Year 2020: Domestic +27%, Medium-sized business + 34%, large energy intensive large industry +8-28%

As they reasonably argue, these increases in costs will simply make the UK less competitive, and will simply encourage businesses to move overseas to locations where there is no similar legislation. Even if accepting that carbon dioxide is a problem, the move of businesses to other locations makes no impact upon the total emissions.

Moving back to the subject of wind power, some selected quotes are given below:

As we have already pointed out the estimates by Mott MacDonald flatter wind-power as they made no allowance for any add-on costs. One of the main reasons is that wind-power is unreliable and requires conventional back-up generating capacity when wind speeds are, for example, very low or rapidly varying, which increases the overall costs of wind-power.

MacDonald assumed load factors of just 25-31% for onshore wind and 35-45% for offshore wind.4
However it should be noted that even these figures for load factors can give an impression of greater reliability than is actually the case. In spells of very cold weather associated with high pressure areas, when there is enhanced demand for electricity, there tends to be very little wind. This analysis was confirmed by BBC weatherman Paul Hudson, who wrote in January 2011:5
“…during the recent intense cold weather, it’s been our traditional coal and gas fired power stations that have been working flat out to keep our homes and businesses warm. And for the third winter running, the intense cold has gone hand in hand with periods of little or no wind. This should come as no surprise since prolonged cold is invariably associated with areas of high pressure”.

The following chart (chart 3) was included in this BBC report. Wind’s contribution to total electricity output (53,020 Megawatts) on 21 December 2010 was, according to the BBC, 0.04%. This insight is a useful answer to those who say “the wind is always blowing somewhere” in defence of wind-power. In Britain on very cold days it effectively is not. Twenty Megawatts of generation should also be seen in the context of the estimates for plant capacity.

They go on to cite research that finds that maintaining back up power for wind costs between 30-45% onto the costs of wind power. Their conclusion on the real costs of wind power is very clear:

The costing of wind-power electricity generation is clearly very complex. But one conclusion can safely be drawn and that is that wind-power is expensive – especially offshore. Under these circumstances it seems unwise to be embarking on a huge programme of investment in wind generated electricity, especially when the country is facing grave economic challenges. This analysis also ignores the perceived environmental costs of wind-power, especially onshore wind turbines.

Although I am not concerned with carbon dioxide emissions, it is still interesting to read this in the report:

In a comprehensive quantitative analysis of CO2 emissions and wind-power, Dutch physicist C. le Pair has recently shown that deploying wind turbines on “normal windy days” in the Netherlands actually increased fuel (gas) consumption, rather than saving it, when compared to electricity generation with modern high-efficiency gas turbines.7,8 Ironically and paradoxically the use of wind farms therefore actually increased CO2 emissions, compared with using efficient gas-fired combined cycle gas turbines (CCGTs) at full power.

In other words, even if looking at the ‘green’ justification for wind power, it seems that wind power is at best a dubious solution to energy provision.

For those that read my earlier posts on wind energy, this should all be familiar material. Problems of reliability of wind, need for back-up generation, and the location and connection of wind energy into the grid; they all make wind power  expensive. This is the conclusion of the report:

It is expensive and yet it is not effective in cutting CO2 emissions. If it were not for the renewables targets set by the Renewables Directive, wind-power would not even be entertained as a cost-effective way of generating electricity or cutting emissions.

From my perspective, the most interesting aspect of the report is the way in which wind power is in receipt of indirect subsidy, which are often not considered in the official reports and statistics. It is something that has (as far as I know) not been the subject of analysis in New Zealand, and I would be interested to see how wind power ‘stacks up’ here if such a study were undertaken. Perhaps such a study is overdue, as there is a big push for yet more wind power here.

At the very least, the economics of wind power are extremely questionable, and the potential costs are loss of competitiveness, and higher bills for consumers. Those higher bills, of course, will have greater impact upon those on low incomes, who spend a greater proportion of their income on necessities such as power for heating.

Note: If you have not seen it, there is a very good post on the manipulation of temperature data on the Climate Conversation Group. Well worth a read.

An Entertaining Take on the Economics

I recently came across this Youtube presentation that examines the economic consequences of the measures being undertaken to reduce carbon dioxide output. It is quite simplistic, but still makes some good points about the basics of the economic impacts. The entertaining aspect is watching the arguments being developed through an illustrator on a whiteboard. I hope you find it entertaining.