Thursday, January 31, 2013

Inside Spain: behind the protests

On World Voices, the Crunch news from a Spain-domiciled Englishman. It made me realise how little I know, and how much I want to. Here's some of my supplementaries:

1. The media in Spain: who and what would you read if as a foreigner you wanted to get at the truth (and what are their hidden biases)?
2. The 15-M Movement: how did it mutate? What are the Movement's personalities, images and symbols?
3. How are modern social media (Twitter, Facebook, iPhone video etc) stimulating and organising people within our democracies?
4. How does (doesn't) the weird party-list-based voting system work in Spain?
5. What are the Spanish Government's work creation initiatives, and do they work?
6. What are the effects of extra tax as experienced by business owners, wage earners, shoppers - and what do they do to get round / deal with it?
7. What are Spanish public servants like, to deal with?
8. What have been the effects of terminating contract workers in the public sector to save money, as a first resort before considering the need for some of the permanently employed?
9. What does  the increasing unemployment look like on the street?
10. How does the modern protest resemble (how is it linked with) political agitation and enmities in the past (cf Orwell in Catalonia)?
11. Who else has noticed the return of the beggars - and how are they different from the cripples and  beggars of Spain decades ago?
12. What is Spain's experience of immigrants, especially from non-EU countries? Are there any attempts to control their numbers? Any tensions, as in the UK?

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Spain: The pain in Spain leads many to complain

Picture: Wikipedia

There was a time when Spain was as exotic and unexplored to Brits as Mali; but even now, there is much about the country that the tourist probably doesn't know, and I certainly don't. CIngrams has taken up my suggestion of a piece on the Spanish experience of the Great Financial Crisis, and for me it stimulates many further questions, which I'll put onto the Supplement page.

He begins by looking at the local protests:

The 15-M ‘movement’, which started at the time of the local elections in 2011 (held on the 22nd of May) mainly consisted of the usual young, hairy types who like to think that they can change the world by shouting slogans. They began peacefully, and in most places they continued peacefully, and the arguments they made were, on the whole, valid criticisms of the cumbersome and opaque electoral system, which multiplies parliaments and civil servants at many different levels, which gives members of those parliaments no incentive to represent the people who vote for them, as they owe their position entirely to the often unknown party controllers, to whom they must be loyal. Parties are state-funded and you cannot choose, and sometimes do not know, who you are casting your vote for. That is decided by the party.

Some of their complaints were about the banks, and showed a certain ignorance of economics typical in the young and those who have not yet worked for anything of their own, but I found them to be approachable, peaceful, not stupid, and I wondered if the government would actually start to take them seriously at some point.
 
Noises were made, but nothing much happened. As usual. What tends to happen is that these protests, even when based on good ideas and conspicuously peaceful, are taken over by the usual suspects, or fade away to nothing. Both of these things happened. The Occupy movement was quiet different from the 15-M, and the original purpose and form was lost, and just fizzled out.
 
Once the government started to recognise the gravity of the situation and actually do something rather than make political noises, it started by doing the wrong things, then attempting the impossible. They decreed, back in 2009, a programme of digging holes and filling them in again, in an attempt to pretend unemployment was lower than it was. Some useful work was done, but much of was a waste of money. They raised VAT, in an attempt to bring in some very short term income, while depressing commerce and investment in the medium term. Only a politician would think that a good idea. They also got rid of as many contracted personnel as possible, in order to reduce their wage bill. Something they were, at the same time, trying to stop other organizations from doing.

Civil servants in Spain have jobs and pensions for life. They cannot be laid off if they become unnecessary, and they are extremely difficult to sack even for laziness and incompetence. Whenever I have to deal with the civil service the difference I see between them and similar workers in the productive economy is enormous. (I could go on about this for hours. Forces self back to point.) So there are two ways the government can reduce its wage bill. One is to terminate the contracted staff, that is those who are not full‘funcionarios’, or who work for companies hired for specific projects. These are mainly building works working on roads and public buildings. The local and national governments here threw many thousands of them onto the dole when the money really, really ran out.

The second way is to reduce the salaries of the permanent workers. Incidentally, the idea of giving public employees unbreakable contracts for life comes from the 19thC and was intended to stop incoming governments from sacking most of the civil service and filling it with their friends. But a solution to a specific problem of corruption when the civil service consisted of only a few thousand people at most, has been allowed to continue until the present day, when there are over 4 million people whose wages are guaranteed with our money. There has never been the political will, or courage, to touch this system and there probably never will be. It is possible though that it will slowly be allowed to wither, at least by governments of the right, and most public employees will indeed be on contracts which can be ended when they have done what they were hired for. I am not too sanguine, however.
 
The early protests were led by the Civil Service unions, for this reason. They got little sympathy from the public because with 4 million unemployed (it’s nearer 5m now) and a similar number unable to reach the end of the month and with the possibility of losing everything at any moment, the public felt that people with a salary for life had little to complain about, even if that salary was a bit less than it used to be.

The unions see it as a good excuse to increase their standing with their members and attack the new, centre-right government. The new opposition suddenly claims to have all the answers it couldn’t find when it was in charge. Everybody complains, but everybody expects someone else to get them out of trouble. That is human nature, but it makes the problems worse, and more difficult to solve.
 
The trade unions regularly appear on the streets, waving flags and shouting slogans that express their grievances and suggest some solutions. They achieve nothing, of course, but it adds to the circus of life. They have not normally been violent except during the national strikes they called in May and November last year. These were poorly supported but in the larger cities the far left makes sure they are noticed and make the evening news, by giving their members permission to break things and attack people. This is for their own political ends, and is not going to solve any of the social problems that exist.

Beggars are also appearing on the streets. Not the usual drug addicts and gypsies, but ‘normal’ people were clearly once working families and who’ve tried every other way they can think of of making ends meet. This shows that, despite what I say in the next paragraph, there are problems much more serious than ‘the government isn’t giving me as much as I would like’, which you hear from most people.
 
People don’t realize or have forgotten what it is that makes an economy work. So many people now believe that government spending isthe economy, and that banks are evil, that it will be hard to re-create a country where hard work, investment, successful businesses employing people, are recognised as good things, to be encouraged and aspired to. The Chinese immigrants are now doing what the Indian and Pakistani immigrants did in Britain forty years ago. They are taking over small shops in large numbers, working long hours seven days a week, offering people things they want, when they want them, at good prices, bothering no one and making sure their children study hard so they can be doctors and lawyers and won’t have to spend 12 hours a day in a little shop. The number of people who routinely moan about this as though it were a bad thing shows that the recovery will take a long time. It doesn’t occur to them that they could do it themselves. It’s too hard for them, so they want someone else to do it. They then seem to assume that they themselves should somehow earn more for not doing it than the people who do actually do it.
 
Similarly, there are many immigrants from South America and Eastern Europe (The non-gypsies and non-gangsters) who are working very hard at what the local people don’t want to do. Most domestic cleaners, carers for children and the elderly, and many agricultural workers and bar staff, for example, are now immigrants, and have been for some years. Some unemployed people would jump at the chance to look after the elderly or work long hours in a bar, but most wouldn’t, and anyone with any kind of qualification fails even to understand the question.

It’s going to be long, slow and messy.
 
Extract reproduced with the kind permission of the author.

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What Lessons From Germany and Denmark? Conclusion

Denmark has demonstrated to the world that a substantial amount of wind generation capacity can be supported in an electricity grid operating feasibly  -  provided there is ready access to large quantities of hydro-electricity.  Germany has yet to demonstrate the feasibility of its own unique mix of wind power and solar generation with the damaging impact these have in combination on the operation of the electricity marklet, and of grid.  To date, it has narrowly avoided disaster - but only by dint of massive imports from sources that make a mockery of its own 'green', anti-nuclear policies; and by redoubling its efforts to build new coal and lignite-fuelled capacity.

In this concluding post we consider the costs of operating in the Danish and German ways.  Did anyone say it was going to be cheap ?

Denmark doesn't have to answer charges of outright infeasibility.  It should, however, be called to account (if only by its electricity consumers) for the cost of operating as it does.  Advocates of wind-power are inclined to state that every unit of wind-based energy generated is a (largely) carbon-free and (almost) marginal-cost-free contribution to the total amount required, even if they acknowledge that something needs to be on standby for when the wind doesn't blow satisfactorily (roughly 75% of the time).  Those claims are highly misleading.  When considering an entire grid-system as a whole, factors must be taken into account such as the material downgrading of efficiency suffered by gas and coal plants when placed on standby for intermittent deployment; and increased power losses arising from decentralised generation.  These factors erode the magnitude of the benefits claimed, sometimes very significantly (though rarely nullify them altogether, as some ill-judged armchair criticism of windpower asserts).

The other main source of whole-system cost derives from the import-export dynamics required to balance the Danish grid.  When imports are required, Denmark pays full price for hydro-sourced electricity from Norway.  By contrast, when Denmark has a wind-powered net surplus, it must effectively dump this into the Nordic market at close-to-zero prices.  Thus, the balance of trade by value goes heavily against the Danes.

Proponents of wind should be made to recalibrate the benefits they assert: but the full data required to make a comprehensive empirical assessment - even in as small a market as Denmark's - are not made available by the grid operators. One is inclined to assume there are political influences at work: but whatever, we know beyond a doubt that the facts tell negatively against the economics of wind.  The Danes have decided - hopefully in a democratic, if not transparent or quantified manner - to pay for the privilege of their chosen generation mix.  With enough money given to good engineers (and Norwegian hydro-generators), most things are possible.  Having met the engineers, however, I may tell you they tear their hair.

The German situation has all of the opaque Danish issues and much more besides.  We have noted before how solar and wind generation distort price-formation in the German wholesale market - solar in a predictable way, wind in a random manner.  Specifically, and much to the (ignorant) joy of green advocates, they trash the wholesale price (the 'day-ahead' spot market for electricity), being bid into the market at very low prices reflective of their marginal cost, the owners being paid anyway at guaranteed high rates.

But the resultant low (sometimes negative!) market price in no way benefits the average consumer.  What happens next is instructive.  As soon as the day-ahead market closes, perhaps at very low prices, the grid operators must then quickly come up with a supply plan for the day in question that is actually going to satisfy demand.  As a starting-point for this exercise, what the day-ahead market generally gives them to work with is a supply-demand match that is more-or-less balanced in terms of global amounts, but can be horribly out of balance in detailed terms; (a) geographically - there is frequently far more generation committed from windfarms in northern Germany than can be accommodated (the centre of gravity of demand is south of a median line); and (b) in terms of reliability - wind cannot be predicted with sufficient certainty 24 hours ahead.

So the grid operators must revise the despatch schedules, and call on imports and various costly sources of short-notice balancing, in order to keep the show on the road.  Of course, they mostly succeed (good engineers, enough money, etc) - but at a cost.  The key is this: they are entitled to charge the extra costs - and they will always be extra, there is never a cheaper way of doing it - across their customer base.  It doesn't appear in the record of wholesale market prices, but it shows up tangibly enough on the bill.  In consequence, Germans pay the second-highest electricity prices in the EC.

So much for direct cash costs.  As mentioned several times, the elephant in the room that threatens to roll over and crush the other occupants is that, unlike the Danish situation, this costly and dishonest state of German affairs is not stable.  Already, voltage in the grids is unreliable to a degree that many high(ish)-tech manufacturing processes cannot tolerate.  They are having to fend for themselves, either by generating their own electricity, or installing costly modulation equipment - quite a commentary on Europe's greatest economy.

To this second category of unwanted (and unforeseen?) costs we may in future need to add the catastrophic consequences should part of the German grid fail, as is widely anticipated.  The prime candidate for the epicentre of a rolling blackout is the region between Karlsruhe and Munich, from where it would cascade outwards to the whole of southern Germany, eastern France, Switzerland, Austria and the Czech Republic.  A week of this in winter will cost lives - many lives - and if the cash cost even matters against that backdrop it will be very large, too.  In case this is thought to be scare-mongering, the reader should be aware that the German Networks Regulator (Bundesnetzagentur) has spoken out on the subject from the moment the nuclear power-plant closures were announced; and the grid operators have contingency plans in place for outright disaster scenarios.

Thankfully, so far, the good engineers and the money have prevailed.
*  *  *  *  *  *  * 
Civilisation is energy-intensive (Lovelock).  What, then, are the lessons for (e.g.) the UK ?  Beware large-scale unintended consequences:  the renewables lobby will leave us to find out the hard way.

No-one has gone as far down this road as Germany, and we may be destined to learn vicariously from them - at their cost.  In terms of basic physical feasibility (never mind the cost) there is a practical maximum proportion of power that can ever be sustainably had from wind until electricity storage can be made cheap and very efficient: and this is not yet a prospect that may be relied upon.  The precise maximum proportion that wind can (physically) contribute will vary from market to market - hydro is critical - but we cannot all tap into Norway as Denmark has done.

If politicians insist on going for wind-power (and solar power) in as blind and grand a fashion as has Germany, (a) the direct cash costs will greatly exceed what we have been led to believe; (b) indirect costs will mount in parallel; and (c) eventually it becomes positively dangerous to life and limb.

I haven't even touched on whether there are any actual benefits accruing to anyone other than investors and manufacturers in the wind and solar industries.  They would need to be very big, and certain ... 

READ THE EARLIER PARTS OF THIS SERIES:
PART ONE
PART TWO
PART THREE


All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Tuesday, January 29, 2013

Nick Drew: EDF nuclear energy horse-trading nearing climax

... and goodbye to a colourful industry player: see Nick's latest here.

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Nick Drew: EDF nuclear energy horse-trading nearing climax

... and goodbye to a colourful industry player: see Nick's latest here.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nuclear Endgame - and a Rogue We Will Miss

Looks as though the nuclear strike-price endgame is in prospect.  EDF had softened us up with mention of £140/MWh for their Hinkley output; I had predicted £119.95: DECC seems to be trying to keep it under the hundred, "whatever that means", as the Inde's writer justly puts it.

Because whatever the notional outcome, bear in mind that (a) it will be index-linked, and the electrons will not be in action until 2021; and more significantly  (b) there are so many valuable concessions EDF can be given under the table by way of capped liabilities etc, the headline figure needs to be very heavily qualified - except we probably won't find out in our lifetimes.  (I remember selling diesel fuel to the old GLC / LTE: they would do anything to keep down the nameplate price - the only thing that was reported to the politicians at County Hall - including offering 12 months' interest-free pre-payment !  Easy when you know how.)

Anyhow, we may be sure it will be trumpeted from the rooftops as a great triumph for all concerned - double (prices) all round !
Marchant: Rogue CEO

With impeccable timing, the industry figure who has done most to highlight the outrageousness of all this has jacked his hand in, and we will miss him greatly.  Ian Marchant, the unlikely CEO of Scottish and Southern - only SSE and Centrica of the Big 6 remain as independent British companies - is calling it quits.  I'm guessing not many readers will have met Fat-boy Marchant, but suffice to say he is not a typical FTSE100 boss. His irreverent, flamboyant speeches, and more importantly his plain-speaking comments on the electricity market 'reforms' in general, and the nuclear nonsense in particular, have been a delight over the years.

Hopefully he will still be around in some capacity or other, and we hope for even more uninhibited outbursts from that ample quarter.  

This post first appeared on Capitalists@Work

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Sunday, January 27, 2013

The weather's odd in Africa, too

Wet heads three months early - see World Voices.

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Central African Republic: Rain three months early

Garoua Boulai, Central African Republic - from Google Maps

It's not just in the UK and USA that we've been having unusual weather. Susan from the C.A.R. reported an unexpected tropical downpour on Thursday night - normally the dry season ends in April.

NPR News says experts don't know whether the apparently changing weather patterns are linked to the vagaries of El Niño * or claimed (and disputed) global warming, but reports that "since 1995, 70 percent of hurricane seasons have been busier than normal."

Or, since that makes 17 years so far, perhaps that's the new normal.
__________________

* But a Bermudan insurer has decided it can predict weather events from sea temperatures.

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Cigarette packaging row - my art entry

Following yesterday's challenge, here's my first:

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Monaco - Grim Pix

See World Voices on the fightback against the media, here.

Monaco: Fighting Hollywood and Fleet Street

 
There's a whiff of invidious republicanism in the entertainment and news media, but the Empire fights back...

The Monaco Times reports that the Palace disapproves of the forthcoming film about the late Princess Grace. The Mail on Sunday today depicts it as a tale of imprisonment in the gilded cage of a sham marriage.

On a separate issue, the Murdoch-owned Sunday Times has lost a court case over its defamatory reporting of the wedding in 2011 of Princess Charlene and Prince Albert II, and has agreed to pay £300,000 in damages.

Covering both, and staunchly loyal to the House of Grimaldi, is "The Mad Monarchist" blogger, describing himself as "Unreconstructed reactionary ever plotting counterrevolution and the restoration of the Old Order."

Saturday, January 26, 2013

Thursday, January 24, 2013

Greece: Woodsmoke smog in Athens as locals burn furniture, forests

See Peak Oil blog here.

Also see our Energy Page story on China, coal and last week's smog there.

UK fuel security threatened by privatisation?

An article in the latest edition of Private Eye magazine (online version here) explores some worries about the proposal in the draft Energy Bill to sell off a system that guarantees oil to military bases and airfields.

An old Greek proverb says: There is no borrowing a sword in time of war.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Wednesday, January 23, 2013

New economical car: Hybrid Air, from Peugeot

The Daily Mail reports (perhaps a bit unskeptically) claims by Peugeot that their new petrol/compressed air hybrid engine will deliver 117 mpg by 2020.

Brian Wang of nextbigfuture.com gives a more conservative estimate of 81.1 mpg, plus a purchase price / CO2 emission comparison with conventional petrol and alternative hybrid systems. If low CO2 is seen as value (and government incentives - e.g. this - could make it a factor for the car user), then Peugeot's offering looks like value for money, turning green chic into simply practical.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: EDF angling for guaranteed profits from building nuclear power stations

Our expert is caustic about the wily French operator and supine British Government - see the Energy Page.

Nick Drew: EDF angling for guaranteed profits from building nuclear power stations

Our expert is caustic about the wily French operator and supine British Government - see the Energy Page.

Nuclear Stand-off Hotting Up

(c) N Drew 2013
The business pages of the Telegraph are a favourite platform for commercial vested interests. De Rivaz of EDF has used them before to 'frame' the context of the farcical bluffing contest being conducted over what outrageous guaranteed price (and other ultra-valuable concessions) he can screw out of HMG for getting started on just the first of his 4 'promised' new UK nukes. And here he is again, the little Gallic tease - 'framing' for all he is worth. We must assume the 'negotiations' are at a critical juncture.
 "Almost all of the necessary pieces are in place. Our new build project at Hinkley Point is 'shovel ready' and only a few crucial milestones remain to be passed. ... Yet I am still asked – should the UK do it? And if so, do we have the industrial capacity and expertise to pull [it] off?" 
Careful with the 'we', monsieur.
"Just two more pieces need to be put in place. First, we await a final planning decision." 
I think you'll find that's a given, matey: this lot have long since bent over for the shafting. Or do you perhaps want some sort of new environmental indemnity thrown in for good measure ...?
"Secondly, and, most crucially, there must be a balanced, stable and durable agreement on the price of the electricity generated. To be durable, this price needs to be fair and balanced for both our company and the Government." 
'The Government': how sweet. What about the people ?! 
"I believe we can reach an agreement with the Government which will transparently display the economic viability of new nuclear, and which can underpin a robust business case for investors. EDF is now closer than ever to being able to make a decision." 
Ah yes, economic viability. And while we are at it, tell us again will you, about the security of supply for all that uranium you get from, errrr, Niger. Surely, a great age of eco-satire is upon us.


This piece first appeared on Capitalists@Work 


Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Tuesday, January 22, 2013

Should China stop burning coal?

See the Energy Page here.

Should China stop burning coal?

See the Energy Page here.

China, pollution and the future of coal (Part 1)

A few days ago, there was an unprecedentedly bad smog in China: the two satellite pictures below compare January 3 to the situation 11 days later (htp: Barry Ritholtz):

Beijing and Tianjin: January 3, 2013
 
Beijing and Tianjin: January 14, 2013

It was partly a consequence of the coldest winter in 30 years, prompting rural Chinese to burn more solid fuel (which is no longer permitted in cities). But air pollution has been on the rise generally, because of increased numbers of power plants (many coal-powered) and cars. As well as the hazards of dangerous gases (such as sulphur dioxide and carbon monoxide), airborne particles below 2.5 microns in diameter are small enough to get deep into the lungs (ironically, this also happens to be an issue for eco-minded Westerncities that choose to incinerate waste.)
Geography is another factor. Like London and Los Angeles, Beijing is liable to periodic temperature inversions that trap particulates in a bowl of cold air, lidded by a warmer layer above. This relief map shows the mountains to the north and west that help to hold in the smog, and the January 13 picture above shows the pollution being pushed up and over them by the southern breeze.

China is hardly the only Asian country with that problem, as the Guardian newssite points out, citing the 4,500 pollution-related deaths in Tehran last year. And the West has long had similar experiences itself: the London smog of December 1952 is estimated to have killed 12,000 and harmed a further 100,000, and In the USA, despite Los Angeles officials battling atmospheric pollution since 1947, it was still reported in 2006 to be killing 9,000 Californians annually.
Last week’s foreign reportage offered more criticism than sympathy: the Wall Street Journal turned it into a story about official secretiveness undermined (said ABC News) by a Twitter feed from the US Embassy in Beijing, which has an atmospheric particle monitor on its roof. The New Yorker’s Evan Osnos hinted at future civil unrest: “Someday, I’ll write about the political effects of environmental pollution [...] Hungary and Taiwan...” In fact, the Chinese authorities are concerned about the issue: Time magazine has reportedon a study co-sponsored by Peking University that linked 8,500 premature deaths to pollution in four cities.

Perhaps there is an undercurrent of envy in the Western reports: it is almost as though the Chinese are supposed to suffer for their hard-won economic success. If so, the feeling is completely unjustified. What has happened over the past 30 years of international trade is reminiscent of the way that Britain exploited the Indian textile industry in the second half of the eighteenth century, when the East India Company ruled there: the low indigenous labour costs undercut British workers, until such time as technological improvements increased our own productivity. In the same way, the West has exported industrial jobs for decades, and now there is the beginning of a trendtowards “reshoring” – which will not be the job-saver for which Middle America might hope, since part of the process will be the increased use of automation.
If there is to be societal unrest, it is just as likely to occur among us as in the East, for US median real wages have stagnated since the 1970s, and now we face growing unemployment plus severe pressure on debt-saddled personal and public finances. This was foreseen by billionaire venture capitalist Sir James Goldsmith, who warned in 1994 of the consequences of the GATT talks then ongoing. And it’s not even as though all the profits of the trade imbalance have accrued to the Chinese: I was startled to read in James Kynge’s book  that “all of the work done in China – the sourcing, manufacturing, transportation and export – rarely qualifies for a return of more than 10 or 15 per cent from a product’s sales revenue.” The lion’s share of profit has been captured by a relatively small group of Western entrepreneurs and financiers and the resulting increase in inequality is straining social relations.

Increasingly free of restriction, the cash tsunami that roars around the world has upset stability in developing nations, too. China has experienced a speculative construction boom that has left 64 million residential units unoccupied, and has become uncomfortably dependent on its near-bankrupt export customers. Others are worried, too: the 2008 Doha round of GATT was quickly stalled by countries that realised the threat to their domestic agricultural production, and it seems significant that this was the time that the US chose to involve itself in the Trans-Pacific Partnership, which until then was a small-scale affair but now looks as though it could be used by the US as an alternative method to force the products of its competitive large-scale agribusiness onto foreign markets.
This is a challenging time for the balance of the world economy, not only for the above reasons but also because of ecological concerns about alleged climate change. However, the USA has refused to ratify the Kyoto Protocol and Canada has withdrawn, so they can hardly criticise China for its emissions.

And China can’t afford to stop its economic development. This study of China’s demographics shows that its population is expected to rise by only another 90 million (or 8% of its 2010 total) by 2030, and then decline. However, the underlying picture is that while not enough children are being born to replace those that die, the people are (thanks to the benefits of modern civilisation) living far longer. Proportionally, there will be fewer people in work, and they will on average be older. Without modern technology, how will they support the country’s dependants?
Coal is vital to China at this stage. The nation has the world’s third largest reserves, but is by far the biggest producer and consumerof coal, and (after Japan) the second biggest importer, too. Such is the rate at which this resource is being exploited in the breakneck pace of development that China is estimated to have used up its reserves in 35 years’ time (others say, half a century to a century).

*******************
Part 2 will look at coal, coal-burning technology and coal's future in China and the West.

Copyright. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Death of a Chinese sage

See World Voices here.

Death of a Chinese sage

See World Voices here.

China: Death of a master

 
Leading Chinese blogger De Day reported the death of Master Nan Huai-Chin in September. Until now, I had never heard of Nan, though he has a following among Western Budhhists.
 
De Day's post (oddly, his last) lists Nan's many writings, most of which have never been translated into English. Yet Nan's school, founded in 2006 when Nan was 89 years old, is influential in both academic and business circles.
 
His scholarship is a fusion of traditions (Buddhism, Taoism, Confucianism) and offers a balance of spiritual and practical, which is why he is revered in China, a country that is struggling to develop materially without losing its soul. 
 
The blogger comments:
 
大师认为人生的最高境界是佛为心,道为骨,儒为表,大度看世界。技在手,能在身,思在脑,从容过生活。
 
- which Google Translate renders as: *
 
"Gurus believe that the highest state of life to Buddhism for the heart, said as bone, Confucianism for the table, and generosity to see the world. Technology in hand, in the body, thinking brain, calm lived."
 
The English is a little fractured but it is wonderful that we can read Chinese at all, thanks to this program. When the peoples of the world can talk to each other directly, we may find peace easier to achieve.
 
By the way, the billion-plus figure at the bottom left of the picture above is the number of hits on De's blog.
 
UPDATE
 
* I am deeply obliged to commenter Qingyun for the following elegant translation:
 
"Buddha's teachings as one's heart,
Taoist teachings as one's bones,
Confucius' teachings as one's countenance,
Gives one a broad worldview.

Skills in one's hands,
Ability in one's body,
Thoughtfulness in one's mind,
Allows one to live at one's pace."

Monday, January 21, 2013

Transhumance

Writing about moving South for the winter, CIngrams makes a passing reference to transhumance, and that sets me off on another few minutes' happy diversion through byways on the Internet. I'd known about seasonal movement of herds in the Swiss Alps, but not the ancient and widespread trails through Spain that were followed well into the twentieth century. CIngrams comments, "Now it has gone for good, and good riddance. It was a very tough way to live, but seen from a distance, there is romance and beauty in it."

I wonder whether much of the fidgety irritation of comment and protest on the Internet is related to the cellular instinct in us to roam as our ancestors did. From the Great Rift Valley we wandered out and along the riverbanks and coastlines of the world, reaching Australia maybe 50,000 years ago. We must have eaten a lot of oysters on the way.

Even now, that restlessness is in the bones of bikers like Richard and Longrider. I have it, too - wanting to change house, job, get to know new people, start new projects. In a way, the nomadism hasn't gone, after all.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Sunday, January 20, 2013

Spain: Crispulito the hedgehog


From the Spain-based Sounds In The Hickory Wind:

Hedgehog Fetishism Revisited

My spiny co-blogger is a creature of strange habits. I have previously accused him of having an underwear fetish as he will run off with any bit of used clothing that happens to get left on the floor. They used to end up in one of his nests, which is why I assumed he liked being surrounded by the smell of human intimacy. But I may have misjudged him (slightly).

I now wonder if he just likes playing with things that smell like us, and he left them in his bed partly for warmth and partly to be sure he could find them again. But now that the heat is really beginning (it's 90º and we're only in spring) and he's been with us long enough to know his way around and to treat us as no more than a harmless, and sometimes useful, inconvenience, he just leaves them lying around when he's finished playing.

Because playing it is. In the summer he keeps them in his bed, too, but in summer we're in the mountains and it cools down rapidly once the sun goes down. But now, the days are hot and the nights are sweaty and he doesn't need a blanket. So he plays with underwear, and socks.

He pushes them with his snout, unable to see where he's going, following the sock as it veers left and right, until it gets caught on something or hits a wall. Then he stops, evaluates the situation, changes its position with his teeth, and goes off again, running behind it until it gets away from him again. He can do this for long periods. Then he will suddenly tire, leave the sock where it is, and go off to eat, drink, or run round in circles, something else he is very fond of.

He used to have a larger circuit, involving several rooms each with more than one door, so he could arrive back where he started and go round again. The region thus created was not simply connected, and I assumed that was part of the fun. However, he has recently taken to running round in much smaller circles, of two or three feet, beside the bed, and he does it so quickly that he often loses his rear legs on the polished wooden floor like a F1 car taking the chicane late in a race. Quite why he finds this entertaining I couldn't say, though I do have a theory.

The problem, I suspect, is that, like all animals, he has hormones, instincts, sap, urges, an understanding of the phases of the moon etc, but he doesn't know that there is such a thing as a hedgesow. If he ever met one I can imagine his face clearing and his shoulders untensing as a lot of things suddenly fell into place. As it is, he is forced to expend his energies and seek an explanation of his inner feelings in forms of play.

Yes, Crispulito is a geek, a Trekkie, obsessed with the details of objectively pointless pastimes because he can't "pull".

Copyright. Reproduced with the kind permission of the author, who says of himself and his friend:

"I am an Englishman who has spent his adult life in Spain, mostly as an English teacher, translator and occasional writer of textbooks. For the last 13 years I have lived in a small city in La Mancha, the hot and dry area south of Madrid. Here I run a language Academy, teach in a high school, teach the odd course at the University, translate articles for anyone who needs it, and drink cold beer while moaning about the government, You might say I am a professional Englishman. We spend the summer, and weekends whenever possible, in the lake district of Ruidera, 70 miles east of here, where we have a house. [Many of the photos on the blog are of that area]
 
Some five years ago my wife saw a hedgehog in a petshop and informed me she wanted it. Being a loving husband I obliged, and he has had the run of the house ever since. Aside from his documented fetishism, he is rather paranoid, never quite sure if he can trust you, and selfish with food, in that when he finds anything especially tasty he looks at you out of the corner of his eye and then runs under the nearest piece of furniture to enjoy it in peace. We have told him that we have chocolate and nuts of our own, and we have no wish to share his beetles, but he isn't taking any chances. He likes to be with us, sleeping under the bed and coming to run around the living room as soon as he gets up in the evening, but he isn't very keen on being picked up and stroked. He has a special, put-upon expression which he reserves for these occasions.
 
He is now nearly five, as I said, but is a happy- if slightly neurotic- and healthy hedgehog, who still spends the night running around the house, eternally optimistic that around the next corner there will be another little morsel. Which we usually make sure there is. In the summer he loves the farm because it smells of the wider world and he cleans the floor of ants and spiders and so on every night. When we arrive there I swear his face lights up."
 
I confess to sharing this writer's erinaceous weakness, as my family raised an orphan hedgehog to fat and sassy adulthood in Cyprus, many years ago. For more on Crispulito's charming ways, and the love of Spain generally, please see CIngrams' blog "Sounds In the Hickory Wind" (Europe bloglist in sidebar).

Saturday, January 19, 2013

Fiji: trouble in Paradise

Fiji's blogwires are humming with discontent at Prime Minister Bainamimara's decision to scrap a draft Constitution that would have required respect for democratic principles. The island has been under military rule since 2009, but has suffered civil unrest since the late 1980s.

As in Ulster, the establishment of peaceful, settled democracy in Fiji is permanently problematic, and for the same reason: the historic importation of outsiders. In 1879, five years after becoming a British colony, indentured labourers began to arrive from India, mostly to work in the sugar industry; some 60,000 were brought in until the scheme ended in 1916.

The workers' contract allowed them to return home after five years, but at their own expense (likely unaffordable); otherwise, free passage would be provided at the end of the tenth year. The subtlety of this plan was that naturally, by that time many of the workforce would be married, have young families and generally have put down roots.

It looks like another legacy of colonialism in the service of business interests. You can follow developments on some of Fiji's blogs on our World Voices page - see the sidebars there.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Fiji: trouble in Paradise


Fiji's blogwires are humming with discontent at Prime Minister Bainamimara's decision to scrap a draft Constitution that would have required respect for democratic principles. The island has been under military rule since 2009, but has suffered civil unrest since the late 1980s.

As in Ulster, the establishment of peaceful, settled democracy in Fiji is permanently problematic, and for the same reason: the historic importation of outsiders. In 1879, five years after becoming a British colony, indentured labourers began to arrive from India, mostly to work in the sugar industry; some 60,000 were brought in until the scheme ended in 1916.

The workers' contract allowed them to return home after five years, but at their own expense (likely unaffordable); otherwise, free passage would be provided at the end of the tenth year. The subtlety of this plan was that naturally, by that time many of the workforce would be married, have young families and generally have put down roots.

It looks like another legacy of colonialism in the service of business interests. You can follow developments on some of Fiji's blogs on our World Voices page - see the sidebars there.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

China: Inside an iPad factory

 
The New Yorker's Evan Osnos interviews Li Liao, an artist who got himself hired by Foxconn in Shenzhen so he could make a gallery exhibit of the experience. Not quite as bad as blood diamonds, of course, but.

And according to Liao, they'll take just about anybody.

Friday, January 18, 2013

Nick Drew: Why Germany is forced back to coal

Our expert explains why eco-minded Germans have returned to the energy source we thought we needed to stop using.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: Why Germany is forced back to coal

Our expert explains why eco-minded Germans have returned to the energy source we thought we needed to stop using.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Thursday, January 17, 2013

When money velocity stabilises, inflation will let rip

A while back, before the trillion-dollar-coin idea that was publicly kited and then smacked down, I too was wondering why, if the government can conjure up money out of thin air and lend it to itself, it can't similarly forgive itself.

Insofar as banks are allowed to get involved brokering the deal, I suppose debt cancellation might deprive them of some of their income stream, but other than inconveniencing a few thousand banking families it wouldn't seem to be a bad scheme. As President Andrew Jackson famously said, "You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! " One longs today for such un-mealy-mouthed leaders.

But this kind of living on debt causes real damage, whether or not it is ultimately extinguished. Because the government is trying to keep things normal in the economy, and spends the borrowed money on salaries and other benefits. This is increasing the stock of cash in the economy.

The reason we don't have high inflation at the moment is that money is changing hands more slowly during the recession - its "velocity" is dropping, and counteracting the boost in the quantity available to spend.

When the velocity stops dropping, inflation will begin properly. (Food and energy prices may be rising at the moment, but there's other factors at work there. Houses, cars and all sorts of other things are trading at a discount still, for ordinary people. Overall, I think we are still experiencing deflation, partially disguised by increased prices for the things rich people buy because they are benefiting from the collapse of the middle class.)

If velocity increases, inflation will roar. Unless government removes money at just the right rate (by taxation, or higher interest rates) - and it will be reluctant to do so because it won't want to be seen to be "killing the recovery". Ordinary savers will be sacrificed for the sake of apparent health in stock and property markets. But the economy will still not have been fundamentally set right, and sooner or later we will need some reset in the currency. In real terms, in the currency of "stuff", the average Western person will be poorer.

And that is why smart, privileged money is pouring into tangible assets. A small fraction of the population will become the "Sultans of stuff".

UPDATE:

Charles Hugh Smith thinks the deflation is unstoppable. But there will be an end, however far off it now seems.  I think spotting the turn and moving out of cash fast will be the test for investors.

John Ward opines, "...there is no such thing as a gradual panic. Those ahead of the panic are openly opting for the last place left offering financial long-term and physical short-term safety: top-end property." Not all of us can afford it. It's the small saver who is being hauled to the stone table.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

What Lessons From Germany and Denmark? [3]

German energy policy has evolved scrappily, with unintended consequences aplenty.  In particular it was (presumably) not foreseen that the very large amount of subsidised solar electricity-generation capacity would seriously distort the wholesale electricity market.  This is greatly to the detriment of unsubsidised gas-fired power stations which would expect to make their money providing peak power during the middle part of the day, at prices commanding a premium over baseload (24/7) prices - a premium that has been substantially eroded by solar.

This situation could probably be sustainable if it were the end of the story.  In logistical terms, after all, it is not fundamentally problematic to introduce a source of electricity that peaks at roughly the same time as demand (midday, in Germany's case).  Unfortunately for German electricity consumers it is only the start of the tale.  For on top of the solar capacity is another large new tranche of renewables - wind power.  This is similarly subsidised and has a marginal cost close to zero.  But far from having the predictable output of solar, it is of course subject to the vagaries of the wind.  It has a similar distorting impact on the wholesale market as solar, but at essentially random times, creating a radically unstable market dynamic.

The purely physical aspects of the system problems caused by intermittent wind generation can generally be resolved with a combination of good engineering and operational practices, and enough money - provided the challenge is on a sufficiently limited scale.  However, in Germany these problems are on a large and growing scale, and the patchwork of solutions available to grid operators is not robust.

It is fairly self-evident that a situation like this requires, inter alia, a lot of flexible power sources.   The best solution is generally to access hydro-electricity.  With sufficient quantities of water stored at the top of a hydro facility, it can respond literally in seconds when called upon to back up some deficiency in supply at short notice - the Danish solution (using Norwegian hydro).

Where, as in Germany, there is inadequate availability of hydro power, gas-fired plant is the obvious second-choice.  It is not as flexible as hydro, but can nevertheless provide a useful contribution to flexibility requirements, albeit at sub-optimal efficiencies.

However, a market-based approach to bringing on flexible resources requires appropriate price-signals.  As we have seen, for much of the time solar power undermines the key price signal, namely the premium of peak price over baseload price, by dint of which it is exactly gas-fired plant that has been rendered uneconomic.  At the time of writing most German gas-fired plant lies idle; and no-one is building any more.

Imports from neighbouring countries therefore feature significantly in balancing the German grid - including hydro from Norway and Switzerland, when available, but predominantly nuclear (France), hard coal and lignite (Poland and the Czech Republic).  We have noted the ironies before.

(Confusingly, Germany also sometimes exports power; and inevitably this is at times of wind and solar surges.  Greens make great play of this, sometimes asserting it proves German energy policy is a roaring success.   But total capacity was never the issue: it is achieving an efficient and reliable balance in the system at all times between naturally variable demand, and increasingly unpredictable supply.)

So if gas is uneconomic, and nuclear is being phased out, where will Germany source its reliable power ? Another key component in the mix (and another irony) is the large-scale building of new coal and lignite (brown coal) power plants within Germany itself.  The ever-growing policy-driven renewables capacity seemingly cannot be halted: but at least the large German coal- and lignite-mining industries can support a new generation of highly efficient fossil-fuel plant.  The cost of CO2-burning permits is at rock-bottom; coal is cheaper than gas and is still economic to burn; and a new plant operates at much greater efficiency and significantly lower emissions than the old coal-fired plant it replaces.  Unfortunately it offers less flexibility than gas, but can make a contribution to this requirement also.

How much pleasure is derived by greens from the large programme of newbuild coal plants is anyone's guess; but it is how practical German power engineers are attempting to square the circle.

There is no guarantee they will succeed.  The final piece in this series will consider the effects and the costs of dysfunctional German energy policy - and a warning to the rest of us.    

READ ON:
PART FOUR (CONCLUSION)

PREVIOUS:
PART ONE
PART TWO


Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Wednesday, January 16, 2013

Nick Drew: "Green" initiatives have contradictory effects

See our energy expert's latest squib here.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: "Green" initiatives have contradictory effects

See our energy expert's latest squib here.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Tuesday, January 15, 2013

The Only Solution Is My Solution

The following Grauniad headline gets my prize for best of 2013 so far:

Rogue geoengineering could 'hijack' world's climate
"The deployment of independent, large-scale "geoengineering" techniques aimed at averting dangerous warming warrants more research because it could lead to an international crisis with unpredictable costs to agriculture, infrastructure and global stability, said the Geneva-based WEF in its annual Global Risks report"
Haha ! They don't like it up 'em, Captain Mainwaring. But aside from 'independent' not fitting with 'dictated by the green lobby', what exactly is the problem ? Let's turn to the report:
"A long series of ethical, legal and scientific questions quickly arises about countless knock-on effects that might be much more difficult to assess ... Almost any change in weather and climate patterns is likely to create winners and losers, but determining causation and quantifying impacts on any given region or country would be a massive challenge."
What, unintended consequences ? Well, b****r me ! That would be like, err, when you subsidise biofuels and discover that entire forests are being felled, and food-stocks diverted, for use as fuel ? Or when you subsidise solar power and find that your electricity grid can't cope ? Or when you implement 'green' policies and find that your CO2 emissions are rising ?

"Determining causation and quantifying impacts would be a massive challenge" !!   Are they reading what they are writing ?  


This piece first appeared on Capitalists@Work

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Saturday, January 12, 2013

Ancient underground city in Turkey!

Seen on Nourishing Obscurity: a fantastic, multi-level underground city that housed up to 10,000 people in siege times, a thousand years ago. Discovered only in 1963, when a Turkish man demolished an interior wall in his dwelling. Don't miss it!

Part 1
Part 2

Wednesday, January 09, 2013

Green energy, black lungs

See the Energy Page for the dark side of "heat from waste".

Green energy, black lungs

See the Energy Page on the dark side of "heat from waste".

Green energy can be a killer

When it comes to ecology, there are debates about evidence, and how reliable it may be.

Michael Crichton's 2004 sci-fi novel "State of Fear", which I read recently, shows how scientific data can be misleading or contradictory. For example, historic air temperature measurements in New York City seem to prove that the atmosphere is heating up; but figures over the same period from an instrument in rural New York State show the opposite. Some of the scientists in the book start with a quasi-religious belief in global warming and bend or discount counter-evidence. By the end of the story I was certainly more skeptical than when I started it, though that doesn't mean I was necessarily persuaded to "cross the floor". There's plenty still to argue about; for example, this internet essay offers a reexamination of some of the science in Crichton's book.

In fact, Crichton himself adds an author's note at the end, in which he gives his view that global warming probably is happening, and that human activity is probably contributing to it. His real point (other than entertainment) is to have us examine evidence more critically, and to watch out for the influence of a scientist's more personal motives - grants for research, career progression, public attention.

There are also debates to be had about competing values.

Most of the world's nations have ratified the 1997 Kyoto Protocol on "greenhouse gas" emissions reduction (in force eight years come next Wednesday). We're trying to do our bit to "save the planet": as part of the UK's 2011 Carbon Plan and 2009 Renewable Energy Strategy the Government has initiated the Renewable Heat Incentive. This encourages the burning of waste as a way of providing heat as well as disposing of rubbish. Sounds good, and there happens to be recently-contructed incinerator only a couple of miles away from me, in south Birmingham.

But it's not purely beneficial, as the readers' letters pages in The Oldie magazine point out. In response to TV personality Johnny Ball's lately-expressed support for incinerators, Michael Ryan of Shrewsbury (January 2013 issue) used ONS data to suggest a link between incinerator emissions and increased infant mortality. In the February issue (just out), Chris Butler of Borough Green in Kent writes in to say that the Public Health Observatory blames atmospheric particulates for 5.6% of mortality in England. (That's not to say that all the particles come from incinerators; nor that we'd live forever if the air was clean. But this London website quotes the same PHO figure and says it's worse in London: 6 - 9% of mortality so attributable.)

Mr Butler makes a second reference in the same letter, this time to the DECC's own July 2012 impact assessment of the Renewable Heat Incentive. This attempts to quantify in monetary terms the pros and cons of (a) doing nothing about incinerators' emissions and (b) introducing stricter rules. If the sums are right, the cost of extra regulation discounted back to today would be £420 million, but the benefits in terms of better health and reduced mortality are estimated at nearly £3 billion. (How are exactly are these figures calculated? What happens if the discount rate used (3.5%) is higher or lower? One can imagine the money-debate rattling on.)

And it can be very hard to apply money to values. How do we price health and life per se, apart from the cost of medical interventions, social security costs for the sick and so on? What counts as the best solution depends so much on what kind of, and the degree to which, "negative externality" is internalized into the calculation, if at all. For example, one of the externalities not assessed in this report is the impact on the ecosystem (see paragraph 33).

And one option is simply not to care at all. Stalin's view on externality was brutally simple: no man, no problem.

Not all particulates are equally hazardous, but none is deemed safe: "the World Health Organisation advise that there is no safe exposure level to P(articulate) M(atter)," says the DECC's report. The danger is not uniform in time, either, e.g. more dioxins are emitted at operational startup and shutdown than in mid-burn.

The damage caused by other pollutants is not yet completely known, and there are many of them: "Incinerator emissions are a major source of fine particulates, of toxic metals and of more than 200 organic chemicals, including known carcinogens, mutagens, and hormone disrupters," says this 2008 report by the British Society for Ecological Medicine. Perhaps the chemtrail conspiracy-hunters should turn their attention from the skies to their local waste tip.

What are the facts, then, and what are the relevant facts, and what values should we use in relation to them? There's so much uncertainty and room for disagreement that the precautionary principle might save us much ill-tempered controversy as well as, possibly, harm to life and health: let's simply make less waste in the first place.

Now to put out two large bags of washed plastic bottles, for tomorrow's binmen.

Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Nick Drew: solar power undermines the efficient market in electricity

See the really enlightening next instalment on the Energy Page.

Nick Drew: solar power undermines the efficient market in electricity

See the really enlightening piece on the Energy Page.

What Lessons From Germany and Denmark? [2]

If the Danish electricity sector is an unrepresentative model for most other nations to follow, by dint of its hard-to-replicate access to ultra-flexible hydro electricity from Norway, the Danes do at least seem to have a feasible (if expensive) structure in place.  The same cannot be said of Germany, that other favourite exemplar of red/green advocates of renewable energy, which upon examination is a very odd model for them to be eulogising.

To summarise: Germany barely got through 2012 without serious blackouts; voltage has become highly unreliable in many parts of their complex grid system; heavily subsidised renewables have trashed the German wholesale power market; neighbouring markets are also suffering as a result of unpredictable surges of German wind-power exports; Germany is building a large number of big new coal- and lignite-fired power stations to cope; in the interim, they have become dependent on large-scale imports from some very dirty old lignite plants in Eastern Europe; and to crown it all, their CO2 emissions are increasing!

How has this come to pass?

On major issues like energy, German policy is generally framed by big, set-piece legislation that lays down what is in effect a national plan.  The last coherent German energy plan dates back to the 1980s, and more recent policies have been layered on top in an ad hoc fashion.  That's how it's often done in the UK and other countries, but for methodical Germany it is anomalous: and intelligent Germans view the resultant mess as inevitable.

The most recent nonsense was the sequence of on-off-on-off nuclear decisions, culminating in a post-Fukushima bombshell: the summary closure of a large part of the nuclear fleet.  This was always going to leave a big gap to fill in a hurry - hence the immediate increase in imports, which naturally come from neighbours with surplus capacity:  France (nuclear, of course), Poland and the Czech Republic (coal, some of it dreadfully polluting lignite).  The ironies are obvious, and one hopes the anti-nuke greens are proud of themselves.

But the subtler and even less tractable issue is the unforeseen impact of large amounts of 'must take' wind- and solar-power, financed by whopping subsidies.  (The electricity doesn't even need to be generated - the producer merely needs to install the plant.  There are many windfarms in northern Germany that are completed but not connected to the grid - the system cannot accommodate them, and they lie idle - getting paid anyway.)

Key to the situation is that the marginal cost of wind- and solar-power is close to zero. Unsurprisingly, at times of the day when large quantities of zero-cost power are being fed into the grid (foisted on utilities who must take it, irrespective of its market value), the impact on the wholesale market price is to reduce it substantially - not just to zero, it sometimes actually goes negative, so that people are being paid to take power off the system

The timing of wind generation is notoriously unpredictable, but solar is straightforward: it peaks around noon.  In Germany (though not in all countries) this at least coincides with peak demand.  The impact on wholesale prices is clear.

Source: EPEX
One cannot fail to notice (a) demand rising to maximum at midday ('Volume' on the chart) which would 'normally' coincide with the highest hourly prices: but (b) a midday collapse in hourly price, which at 1pm is lower than at midnight !  The market price for 'peak' electricity as defined in the German/Austrian market (9 am to 8 pm) is now barely greater than for baseload (24-hour), meaning inter alia that no-one will see any incentive to build or run a plant designed to offer flexibility.  In particular, it fundamentally undermines the economics of flexible gas-fired plant, which - since no subsidies are on offer to fossil fuels - needs a 'normal', undistorted day-time price to pay its way.  And yet that is the very plant needed to balance the vagaries of wind generation !  

Why this was not foreseen is a matter for conjecture.  (Personally, I reckon - and have offered evidence elsewhere - that many Germans who should know better genuinely do not understand how markets work.)  But of this we may be sure: its impact is highly destabilising.

READ ON:
PART THREE
PART FOUR (CONCLUSION)

PREVIOUS: PART ONE
 
 
Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.