Energy - Market Forces or Politics?

[neonlyte]

Portugal is undergoing rapid transformation. No where is this more apparent than in renewable energy.

By 2020 (12 years) Portugal aims to produce 60% of all its energy requirements from renewable sources. It is using four technologies, Wind Turbine, Hydro-Electric, Wave Power and Solar.

The plans are astonishing in their ambition and scale, and led entirely by Politicians.

In the south of the country, the largest solar array ever conceived is under construction, it covers 130 hectares (over 5000 acres) with panels the size of tennis courts tracking the sun. The land beneath the panels, now shaded from the strong summer sun, will be used for agriculture.

The latest wind farm consists of 120 x 3MgW turbines (equivalent to a small nuclear plant), these, and other turbines, will pump water, during surplus energy periods, to seven new hydro-electric dams to balance energy requirements when wind flow drops.

500 wave power generators are being installed, subject to the trial currently underway being successful. These are a series of truck sized modules joined with hydraulic rams and laid to bend with the incoming waves, each joint movement drives the rams, they drive generators and produce electricity.

The cost of these projects is extraordinary yet the government is barely spending a euro. They have guaranteed the price of generated energy for periods of between 15 and 25 years. The returns are sufficient to attract investment from power companies, oil companies and private investors. 90% of the installed equipment will be made in Portugal, the country is already the worlds largest producer of photovoltaic solar cells. Better yet, the country can guarantee the price of electrical energy to any industry wishing to produce in Portugal.

Time will tell if this pans out, it's a bold plan, and for once, it is led by politicians.

 

[rgraham666]

Man, I can't wait to see what the usual suspects will say about this. Once they stop foaming.

Personally, good for them. As useful as business is, ti's generally too romantic in nature and too short sighted to make these sorts of plans.

 

[Jenny_Jackson]

It's hard for me to understand why this is a big deal. The country is on the Med, it's warm and only has about 10,000,000 people. If the U.S. would product 60% of it's energy needs then... WOW!

But still, if they can do it, they deserve an applause.

 

[Roxanne Appleby]

Naturally everything that has value in the world comes from government, and private sector just diminishes all that. Naturally investors and entrepreneurs are incapable of meeting human needs (and making a profit from doing so) without the direct guidance of wise politicians and bureacrats telling them what to do.

"They have guaranteed the price of generated energy for periods of between 15 and 25 years."

OK, seriously, at root this is an indirect subsidy to forms of energy that at this moment are less cost effective than conventional forms, paid for by Portugal's energy users. It's essentially an indirect tax hike - and a really big one - with the loot going to a particular set of "winner" corporations who own and manage these projects.

Will these currently non-cost effective forms of energy production be what the world comes to rely on as fossil fuels become more costly over the next 50-75 years? Who knows. Portugal's (and every other country and state's) politicians and bureaucrats claim that they do know, however, and are willing to use other people's money to enforce their opinions, whether those other people like it or not.

BTW, if Portugal (or any other nation) wanted to provide an indirect subsidy in a way that incentivized and rewarded entrepreneurial innovation across the board, rather than just enriching a handful of operations selected by politicians and bureaucrats, they could just impose a very high carbon tax on fossil fuels. The money would then go to the government rather than to particular "winners" selected by those pols and 'crats. Of course there are no fat cat winners to reward said pols and 'crats under that decentralized system, so it's less popular in those circles.

 

[rgraham666]

Naturally everything that has value in the world comes from government, and private sector just diminishes all that. Naturally investors and entrepreneurs are incapable of meeting human needs (and making a profit from doing so) without the direct guidance of wise politicians and bureacrats telling them what to do.

Do you have any evidence of that?

 

[Roxanne Appleby]

Do you have any evidence of that?

That's called sarcasm. It was primarily a reaction to your crack about "the usual suspects." I have added substantive content to the post.

 

[christabelll]

Personally I think its awesome that a country has stepped up and done something about energy needs in their country and is offering it to others.
Americans are still far too dependent on fossil fuels... and unfortunately the government hasnt offered any one truly enough incentive to make it profitable to change it...

If we ever build a new house (not simply remodeling the old) I want geothermal solar and wind to be wired in for my needs....

And I really want someone to do something with the "Burning Water" experiment... salinated water burns hotter than any other fuel source out there short of fission...

we have tons of waste water and salt is cheap and abundant.... hmmmmmmmm

 

[voluptuary_manque]

Salinated water burns?

 

[Xelebes]

I hope that Solar Tower in El Paso, Texas gets built. If it gets built, the USA will be able to reclaim world's tallest structure record once again. The tower is projected to rise 1 000 m (3 281 feet.)

 

[rgraham666]

That's called sarcasm. It was primarily a reaction to your crack about "the usual suspects." I have added substantive content to the post.

Smatter, Roxanne? You never object when people on your side of the debate call my side 'the usual suspects'. The vice hurts when it's your gonads in it?

 

[rgraham666]

Naturally everything that has value in the world comes from government, and private sector just diminishes all that. Naturally investors and entrepreneurs are incapable of meeting human needs (and making a profit from doing so) without the direct guidance of wise politicians and bureacrats telling them what to do.

"They have guaranteed the price of generated energy for periods of between 15 and 25 years."

OK, seriously, at root this is an indirect subsidy to forms of energy that at this moment are less cost effective than conventional forms, paid for by Portugal's energy users. It's essentially an indirect tax hike - and a really big one - with the loot going to a particular set of "winner" corporations who own and manage these projects.

Will these currently non-cost effective forms of energy production be what the world comes to rely on as fossil fuels become more costly over the next 50-75 years? Who knows. Portugal's (and every other country and state's) politicians and bureaucrats claim that they do know, however, and are willing to use other people's money to enforce their opinions, whether those other people like it or not.

BTW, if Portugal (or any other nation) wanted to provide an indirect subsidy in a way that incentivized and rewarded entrepreneurial innovation across the board, rather than just enriching a handful of operations selected by politicians and bureaucrats, they could just impose a very high carbon tax on fossil fuels. The money would then go to the government rather than to particular "winners" selected by those pols and 'crats. Of course there are no fat cat winners to reward said pols and 'crats under that decentralized system, so it's less popular in those circles.

Hmm. The article didn't state anything about what companies the government was 'rewarding' or on what grounds. It simply stated what the goals the government set for renewable energy sources. So I don't see your complaint about 'pols and 'crats' being relevant.

The 'pols and 'crats' have been charged by the people of Portugal to make decisions that affect the future of the country. They may not know, but they do have to guess. Just as a company has to guess when they introduce a new product.

And I can't quite see how your idea of a carbon tax would change things. That is after I got over the shock of you being in favour of a tax. It also interferes with the natural progression of the market as well. And the government will still be involved in deciding who gets to build what.

Finally your post doesn't deal with my original point. Very few businesses, that I'm aware of, make plans for what their business will look like twenty five years in the future. Chiefly, in my opinion, because none of the people involved will be around to take the credit and reward themselves for doing so.

 

[Roxanne Appleby]

Smatter, Roxanne? You never object when people on your side of the debate call my side 'the usual suspects'. The vice hurts when it's your gonads in it?

Oh, you or anyone else can call others whatever you want around here (obviously). "Usual suspects" just causes eyeballs to roll - there's no heat or incivility to it. It's what I refer to as "throwing elbows" in these debates - rough play that makes the game more lively without crossing outside the bounds of civility.

 

[christabelll]

Salinated water burns?

Yes there was a whole article/video thing on it back in January -

Salinated Water subjected to certain radio frequency's reflected through it burst into flames. ... Give me a bit and I will see if I can post the link...

Hey - BTW - I adored your newest story. Lots of images to it will take me a day or two to sort out what I want.

Would ya care to do a favor for me?

 

[Roxanne Appleby]

Hmm. The article didn't state anything about what companies the government was 'rewarding' or on what grounds. It simply stated what the goals the government set for renewable energy sources. So I don't see your complaint about 'pols and 'crats' being relevant.

The 'pols and 'crats' have been charged by the people of Portugal to make decisions that affect the future of the country. They may not know, but they do have to guess. Just as a company has to guess when they introduce a new product.

And I can't quite see how your idea of a carbon tax would change things. And the government will still be involved in deciding who gets to build what.

The article said the government is "guaranteeing the price" of the non-competitive forms of energy. Which means prohibiting the sale of a competing product for less money. (It does not say, but presumably it will tax away the artificial profits the higher prices will generate from the sale of less costly conventional forms of energy, which will generate the overwhelming majority of the nation's energy for the forseeable future.)

Under a carbon tax regime the politicians and bureaucrats do not have to know which form of alternative energy will turn out to make sense. A good thing, since they cannot know anymore than anyone else. The tax creates a level playing field between all non-fossil fuel energy sources. It allows the market - ie. the voluntary choices of consumers - to select winners and losers based on which forms deliver the best value. Inventors, entrepreneurs and investors who devise and take risks to produce worthwhile innovations are rewarded. Consumers who conserve are rewarded.

You might ask yourself who's being rewarded when politicians and bureacrats select winners and losers, rather than consumers. Will it be those who excel in using technological and business innovation to add value, or those who have the best lobbyists? Generally the latter are big incumbent producers like existing utility companies.

Does a carbon tax interfere with free market choices? Yes - as does any kind of tax. As long it's revenue neutral - ie. some other tax is cut by the amount the new tax raises - it's OK by me. Hey - you "usual suspects" are the ones who are all hepped up about "peak oil" and "we're all gonna die " global warming. You're the ones who want to change the behavior of consumers. I'm describing a tool that will do it, in a manner that's much more constructive than just handing over more power to the political and government class.

 

[oggbashan]

As a small business in the UK I already have paid a carbon tax - a tax on top of my energy cost to pay for the development of new forms of power generation.

Now I have retired I cease to pay that particular tax on power for my domestic use but I pay very high taxes on fuel for my car and the taxes on truck fuel as a cost added to everything I buy that is transported to the retail store. Truck fuel in the UK now costs 8 dollars a US gallon.

Og

 

[Stella_Omega]

I like it.

And the wave generator is amazing! It solves the problems that tidal generators have; it doesn't reduce the wave action to any huge extent.

 

[Roxanne Appleby]

As a small business in the UK I already have paid a carbon tax - a tax on top of my energy cost to pay for the development of new forms of power generation.

Now I have retired I cease to pay that particular tax on power for my domestic use but I pay very high taxes on fuel for my car and the taxes on truck fuel as a cost added to everything I buy that is transported to the retail store. Truck fuel in the UK now costs 8 dollars a US gallon.

Og

That's not exactly what I'm talking about, but the effect is similar. My preferred regime would be to gradually ratchet up the tax on fossil fuels, and lower income taxes by the amount the new taxes raise (with the actual form of the tax cuts devised via the usual political mud wrestling). The government would have no role in supporting research or picking winners and losers - a good thing since it hasn't a clue what alternatives will end up making the most sense. Instead, the fact that people have to pay more for fossil fuels because of the tax both subsidizes alternatives and increases the incentives to innovate new ones (assuming the tax is high enough).

Oh, my preferred system also gives means-tested rebates (or "prebates") to those with incomes too low to benefit from the offsetting income tax hikes. They would have the same incentive as everyone else to conserve, but in the aggregate those at any given income level would not pay any more than before the new tax regime. (Obviously individuals who use more than the average amount of energy would pay more. But hey - the goal is to change behavior, right? You can't do that without, er, changing behavior.)

 

[Roxanne Appleby]

I like it.

And the wave generator is amazing! It solves the problems that tidal generators have; it doesn't reduce the wave action to any huge extent.

Yeah, but just because something is neato-keeno doesn't mean it makes sense economically. That's one of the potential problems when the politicians and bureaucrats choose rather than letting markets sort it all out - you get a lot of polically sexy neato-keeno's that might not make any sense or advance our civilization any further in the search for the energy source that will eventually replace fossil fuels. Aggravating the problem is the susceptability of those pols and bureuacrats to selecting alternatives that primarily benefit smooth-talking fat cats and rent seekers.

 

[Stella_Omega]

Well, you've often said that atomic energy is the only possible viable energy source.

So I'm inclined to suspect a bias in your opinions.

In any case, we might find out one way or the other with this experiment.

 

[neonlyte]

It's a indirect tax

I agree with you Rox, the subsidy is an indirect tax. The other side of the coin is Portugal is entirely devoid of all fossil fuel. It currently imports 85% of its energy requirement. The government plan, from what I've read, is to become a major player in the production of alternative energy equipment. There is a kind of virtuous circle in play, production of high value technology goods for export improves the economy, increases knowledge (and wages) in the labour pool, and may attract new business to the country. How consumers will feel when electricity prices rise remains to be seen.

Incidentally, we have a new photo-voltaic technology here, plain glass collectors, can be used in ordinary windows. It has the potential to drive down the cost of photo-voltaic energy simply by volume production. I understand the technology is being licensed, the first three years production in Portugal is already sold. Don't ask how it works or how efficient it is, I've no idea.

 

[neonlyte]

It's hard for me to understand why this is a big deal. The country is on the Med, it's warm and only has about 10,000,000 people. If the U.S. would product 60% of it's energy needs then... WOW!

But still, if they can do it, they deserve an applause.

Pssst... it's on the Atlantic

 

[neonlyte]

Yeah, but just because something is neato-keeno doesn't mean it makes sense economically. That's one of the potential problems when the politicians and bureaucrats choose rather than letting markets sort it all out - you get a lot of politically sexy neato-keeno's that might not make any sense or advance our civilization any further in the search for the energy source that will eventually replace fossil fuels. Aggravating the problem is the susceptibility of those pols and bureaucrats to selecting alternatives that primarily benefit smooth-talking fat cats and rent seekers.

They haven't chosen. What they have said is 'we will pay so much per kw for wave, wind and solar. We guarantee that price for 15 - 25 years. Now show us what you can build with that return.'

The risk is entirely with the producers, innovators and investors. Yes... the consumer pays in the end, but they will pay increasing energy prices in any case competing on the world market for energy. In the given time scale, global energy problems will not be resolved, it seems to be a neato way to test a hypothesis.

 

[Roxanne Appleby]

Well, you've often said that atomic energy is the only possible viable energy source.

So I'm inclined to suspect a bias in your opinions.

In any case, we might find out one way or the other with this experiment.

Oh I'm very biased - but this carbon tax proposal is not. As I said it creates a level playing field for all non-fossil fuel energy sources. Nukes should not be excluded - but neither should they benefit from any other direct or indirect subsidies.

 

[oggbashan]

From my house I can see a wind farm of 30 wind turbines in the Thames Estuary.

When originally projected it was intended to supply up to one quarter of the electricity needs of our local district of about 150,000 people.

Between then and construction the efficiency of the generators improved so that it actually supplies between 45% and 50% of our demand. The generators are being upgraded to supply about 60%.

The London Array to be built further out from the coast will possibly supply about one third of Greater London's electricity needs.

Of course the figures above are notional. The power generated is put into the National Grid and used wherever needed at the time it is generated.

The electricity supplied costs more than that generated by natural gas power stations and alternative systems have to be in place for when the wind doesn't blow but all the wind-generated power saves fossil fuel use.

Wind power is becoming more cost effective as the technology develops and the cost of oil production increases. I think that wind power in the UK will become as financially efficient as coal or nuclear power generation within the next ten years. It will still be more expensive than natural gas.

The development I think is exciting is the home production of energy by individual householders. I could put up my own windmill, my own solar heating or solar power panels and sell my surplus to the National Grid. If millions of householders did that, even if each only produces a proportion of the power they use, the UK could reduce its reliance on imported fuels to a fraction of our present use. The house next door was built with solar panels to produce hot water and has been using those panels since the late 1960s. It took twenty years to pay back the capital cost but since the late 1980s that hot water has been free.

Og

 

[Roxanne Appleby]

They haven't chosen. What they have said is 'we will pay so much per kw for wave, wind and solar. We guarantee that price for 15 - 25 years. Now show us what you can build with that return.'

The risk is entirely with the producers, innovators and investors. Yes... the consumer pays in the end, but they will pay increasing energy prices in any case competing on the world market for energy. In the given time scale, global energy problems will not be resolved, it seems to be a neato way to test a hypothesis.

Well they have chosen - wave, wind and solar. Maybe one of those will make sense and maybe not, and something like geothermal or nukes will make much more sense. Or something that some unknown genius is cooking up in a garage right now. Under the carbon tax regime that genius's miracle solution would compete on a level playing field. Under the plan as described he would be frozen out. It is good that they apparently are not directing the subsidies to any particular providers - apparently. I would keep an eye on that though, because frankly I'd be very surprised if a handful of politically well-connected incumbent producers don't end up with the lion's share of the loot.