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ECONOMIST Debate on Renewable Energy (Part I: W. S. Jevons Lives!)

I am part of an online event hosted by The Economist magazine debating the proposition:

This house believes that subsidising renewable energy is a good way to wean the world off fossil fuels.

I am opposed. Defending the motion is Matthias Fripp, Research fellow, Environmental Change Institute and Exeter College, Oxford University, who defends renewables from the premise that “we must reduce global greenhouse gas emissions by at least 80% by 2050 in order to avoid dangerous risks to the environment and ourselves.”

With my opening statement, I began with a recent observation by the rising UK intellectual star Matt Ridley and continued with the timeless insight of William Stanley Jevons. Readers of MasterResource know Jevons well from previous posts, but I wanted to make sure to put him front and center of this debate to awaken his homeland that he ‘refuted’ renewables nearly 150 years ago.

I also bring in crony capitalism, the popular term for rent-seeking businesses in the mixed economy (what I prefer to call political capitalism). That has to be a sore spot among the statists these days, not so much with Solyndra but because their renewables scheme involves so much back-room politicking (cough, cough).

My opening statement follows. Part II and Part III of our debate will follow in the next days. Be sure and vote!

——————

“To persist with a policy of pursuing subsidized renewable energy in the midst of a terrible recession, at a time when vast reserves of cheap low-carbon gas have suddenly become available is so perverse it borders on the insane. Nothing but bureaucratic inertia and vested interest can explain it.”
- Matt Ridley, Gas Against Wind, New Geography, November 3rd, 2011.

Governments should end subsidies to renewable energies and let consumers determine winners and losers. Wind and solar, in particular, cannot power a modern society and require fossil-fuel blending to play even a limited role. Additionally, the alleged market failure of fossil fuels should be revisited in the light of the economic failure and government failure associated with coercive energy planning.

Background
The renewable energy era came to a close with the advent of mineral energy just a few centuries ago. Fossil fuel, a radically superior form of energy in terms of abundance, reliability, portability, flexibility, storability and density, was required to run machinery for the Industrial Revolution to begin the process of lifting mankind out of poverty and into a process of increasing wealth and growth.

Coal, petroleum and natural gas-and now the frontier hydrocarbons of tar sands, orimulsion, shale oil and shale gas-define our energy age. In his 1865 classic, The Coal Question: An Inquiry Concerning the Progress of the Nation and the Probable Exhaustion of Our Coal Mines,1  William Stanley Jevons explained how there was no going back. “With coal [fossil fuels] almost any feat is possible or easy; without it we are thrown back in the laborious poverty of early times.” (p. viii)

Fossil fuels, in fact, are required for (intermittent) wind and solar to operate as industrial, modern energy. Windgas, not wind, is what typically goes to homes, businesses and factories, for example. This is because of the prohibitive cost of storage capability at wind farms and in most on-grid solar installations.

Jevons’s views: still relevant
Jevons’s book, which launched the discipline of energy and mineral economics, speaks to the house proposition. Jevons understood the severe shortcomings of renewable energy for a modern age.

Energy density and resource reliability, as Vaclav Smil and Robert Bryce have recently written, explain why politically correct renewables cannot compete against fossil fuels. Their analysis updates Jevons’s insights made nearly 150 years ago, which are worth revisiting (quotations below).

Wind power: not industrial-grade energy

“The first great requisite of motive power is, that it shall be wholly at our command, to be exerted when, and where, and in what degree we desire. The wind, for instance, as a direct motive power, is wholly inapplicable to a system of machine labour, for during a calm season the whole business of the country would be thrown out of gear.” (p. 122)

Civilization … is the economy of power, and consists in withdrawing and using our small fraction of force in a happy mode and moment.” (p. 122)

Wind power: land-constrained

“No possible concentration of windmills … would supply the force required in large factories or iron works. An ordinary windmill has the power of about thirty-four men, or at most seven horses. Many ordinary factories would therefore require ten windmills to drive them, and the great Dowlais Ironworks, employing a total engine power of 7,308 horses, would require no less than 1,000 large windmills!” (p. 123)

Biomass: land limited

“We cannot revert to timber fuel, for ‘nearly the entire surface of our island would be required to grow timber sufficient for the consumption of the iron manufacture alone’.” (p. 140)

Geothermal: rare

“The internal heat of the earth … presents an immense store of force, but, being manifested only in the hot-spring, the volcano, or the warm mine, it is evidently not available.” (p. 120-21)

Hydropower: unreliable

“When an abundant natural fall of water is at hand, nothing can be cheaper or better than water power. But everything depends upon local circumstances. The occasional mountain torrent is simply destructive. Many streams and rivers only contain sufficient water half the year round and costly reservoirs alone could keep up the summer supply. In flat countries no engineering art could procure any considerable supply of natural water power, and in very few places do we find water power free from occasional failure by drought.” (p. 129)

Conclusion
The future belongs to the efficient. Efficient energies are those naturally chosen by consumers who know their needs better than an intelligentsia and/or central planners. Government-dependent energies, ipso facto, breed
crony capitalism under which rent-seeking by private companies corrupts the political process.

We-the-people energy relegates renewable energy to niche applications (off-grid solar, for example). This is where it should stay in a world where more than 1 billion people need access to the most economic energy, and the rest of the world where economic growth leads to better living.

1 Jevons, W.S., “The Coal Question: An Inquiry Concerning the Progress of the Nation and the Probable Exhaustion of our Coal Mines”, Macmillan, 1865; 2nd edn, Macmillan, 1866; 3rd edn, A.W. Flux (ed.), Macmillan, 1906; reprint, Augustus M. Kelley, 1965.

8 comments

1 Donald Hertzmark { 11.09.11 at 8:02 am }

Well summarized, Rob.

Just this morning economist Jeffrey Sachs was once again calling for higher taxes as a curative for what ails the US. He cited, among other things, the great investments that the Northern Europeans have made in renewable energy using these higher taxes, as a reason for the US to adopt such policies.

Back in the real world, I can assure him and our readers that most of the Euros would love to have our shale gas “problems.”

2 Tom Tanton { 11.09.11 at 9:45 am }

We must continue to realize there are two aspects here: doing the right thing versus doing the thing right. Separate the idea of renewables (or not) from the idea as to HOW to get more renewables. Subsidies (and market mandates like RES) simply condemn technologies to the welfare-dependent state and reduce if not eliminate progress.

3 David Appell { 11.10.11 at 2:29 am }

Robert Bradley Jr wrote:
Governments should end subsidies to renewable energies and let consumers determine winners and losers.

Why?

Also, should government end subsidies to fossil fuels? In particular, should producers and users of fossil fuels be required to pay for the damage their use causes to human health and ecosystems? A recent paper by William Nordhaus and colleagues finds that generating electricity by burning coal causes more damage than value added:

Muller, Nicholas Z., Robert Mendelsohn, and William Nordhaus. 2011. “Environmental Accounting for Pollution in the United States Economy.” American Economic Review, 101(5): 1649–75.
http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.5.1649
http://nordhaus.econ.yale.edu/documents/Env_Accounts_052609.pdf

Is that fair? Would it be acceptable if I made a product and dumped the waste products on your front lawn, freely and without consequence, regardless of how it affects your health, your children’s health, your lawn, your property value, or the ability of someone to live there in the future? Wouldn’t you complain and expect me to clean it up at my expense?

How can renewable energies possibly “compete” with fossil fuels when the latter are allowed to socialize their destructive by-products?

Wouldn’t a truly “free market” be not just free, but cost-free?

4 Donald Hertzmark { 11.10.11 at 1:22 pm }

David,
An opportunity to end subsidies to both conventional and renewable energy sources is one that would put the renewables out of business for grid-connected energy. The most recent assessment of the value of subsidies by the US Department of Energy, published earlier this year, showed that the US Government provided $37 billion in various subsidies and tax incentives for energy production, transmission and end-use.

Out of this total, about 5% went to coal, 7% to oil and gas and almost all of the rest to renewables and conservation, with renewables taking about 50% of total expenditures. A significant fraction of conservation funds went to the automobile industry and most of the rest was stimulus money for building efficiency, a notable boondoggle. Outside the electricity sector renewables receives fully 73% of total US Government subsidies and tax incentives.

On an output basis the subsidy picture is even more distressing. Subsidies for wind and solar fall into the range of $20-25 per million BTU, about twice the price of oil on an energy basis and more than five times the price of natural gas. Subsidies for oil,, gas and coal cost far less than $1 per million BTU.

The hydrocarbon fuel industry could accommodate an end to all subsidies without any discernable change in output or investment. Wind and solar would generally collapse, as is noted in today’s (10 November 2011) Financial Times article on the subject.

As to the claims of excess environmental damage contained in the Muller paper. These calculations rely primarily on a linear extrapolation of damages to health and production in the “berry picking” sector (I am not joking, the model used by the authors has two sectors, berry picking and power generation) of the economy based on the extremely high, and uncontestably harmful impacts of air pollution in China. Back in the real world dose-response relationships tend to be non-linear, with 10x less pollution likely to yield 0.05x or less harmful impacts on health and productivity.

The economic model used to calculate the relationship between environmental damages and value added by sector founders not only on the unlikely damage function, it also ignores the value added to the economy by a reliable energy supply. Were the US to shut down coal-fired power plants on the basis of this paper then about 45% of electricity generation would be lost. This is not a marginal effect, it is central to the economy. Entire industries, just not the berry pickers, would cease to exist without reliable electricity supplies. The very fabric of the economy would be placed at risk, renewables would not be able to play any meaningful role, since they, too, rely on integration with hydrocarbon-fueled generation to feed into the grid.

An all-out effort to promote gas-fired generation could eventually replace the lost coal capacity, but not for at least 20 years and not without vastly greater investments in shale gas production and its sidekick, hydraulic fracturing. The last I checked fracking was not high on the list of technologies supported by renewable energy proponents.

5 James C { 11.10.11 at 2:41 pm }
6 rbradley { 11.11.11 at 11:58 am }

[RB; YES, AND THESE SUBSIDIES ARE GOVERNMENT- RUN ENERGY COMPANIES KEEPING PRICES ARTIFICIALLY LOW TO 'BRIBE' VOTERS, A SEPERATE ISSUE FROM PICKING WINNERS AND LOSERS AMONG ENERGIES .]

7 rbradley { 11.11.11 at 12:03 pm }

David:

Don Hertzmark provided most of my answer to your query, but

1) let’s end all government subsidies

2) obviously a system of private property rights and tort law comes into play with damages such as throwing one’s trash on anothers’ property.

But please don’t define CO2 emissions, including your own, as ‘trash’.

8 Energy Density in the Driver’s SeatInstitute for Energy Research | Institute for Energy Research { 05.15.12 at 8:48 am }

[...] scholars from William Stanley Jevons to Vaclav Smil to Robert Bryce have emphasized the primacy of energy density. In the nineteenth [...]

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