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."

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.

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).

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

Photo: Wikimedia

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

Photo: Daily Telegraph

 

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.

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.

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.

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.

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.

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

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.