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Yes Mr. Kirkup – But It’s How You Get Markets To Work That Matters

Carbon emissions

James Kirkup wants us all to know that net zero is going to be really lovely and easy because markets work. Well, yes and no. Markets do work but the question is how do we get them to do so?

Those Tory opponents of wind power were wrong, and wrong in a very un-Conservative way: they bet against the market. They failed to anticipate one of the most important developments in the past decade of human history: the sharply falling cost of renewable energy. Globally, the cost of power from onshore wind is down 70 per cent since 2010.

That’s because markets work. The financial incentive to generate more power from renewables more cheaply drove industry to innovate and improve. Ignoring Cameron’s feebleness, the market anticipated demand for renewable energy and innovated to meet it. Comparing new sites, it’s now cheaper to get power from new wind than to burn coal.

Whether we wholly believe the assertion there isn’t quite the point. Dispatchable power is not quite the same thing as intermittent and that explains at least some of that price difference. We can also mutter about whether those wind prices include the construction of the necessary dispatchable back up power and so on.

But Kirkup is making a different mistake about that power of markets. Because he’s still running with the idea that the wise people in government are usefully able to pick and choose how a problem is to be solved. Which ain’t so.

It’s fine – well, fine if you’re right – to say that this thing is bad, something must be done to reduce or cease this thing. It’s the leap over to therefore I should decide what should replace this thing which is the error. Because you’re just you. And if you’re a Minister it’s worse, you’ve done PPE with a masters in backstabbing, not anything actually useful when considering technological alternatives.

So, the correct policy is to deter that bad thing while leaving it open to all and sundry to come up with replacements. Which might include less commuting, more working from home, smaller cars, better insulation, fracking, nuclear, solar, tidal, microwaving ‘leccie down from space based solar and on and on and on.

That is, the answer is to introduce the disincentive – the carbon tax – and leave the solution space open.

Just because carbon emissions are a problem – OK, even if carbon emissions aren’t but are identified as such – it’s still true that politicians deciding upon technologies is the incorrect answer.

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Michael van der Riet
Michael van der Riet
4 months ago

Having done some work on a wind proposal for NERSA I can assure you that the strike price for wind is roughly four times higher than coal. Yes it has come down over the last twelve years it was seven times. Wind is only competitive after factoring in the huge subsidies, but when consumers have to pay an additional green levy on their electricity bills the “cheaper” bit goes up in smoke, doesn’t it? We Saffers would be paying sixty per cent less for electricity without the renewable contribution.

Esteban
Esteban
4 months ago

It’s financially viable (as long as you ignore the subsidies, cost of back-up power, maintenance and replacement much earlier than budgeted for, penalties tacked on to alternative sources and a few other things).

bloke in spain
bloke in spain
4 months ago
Reply to  Esteban

If energy generation had been left to sensible economics, wind would have come along what it was economically cheaper than what it replaced. The intermittency problem would have been solved as part of that. Same applying to all the other alternative energy sources. There’s no reason to think it wouldn’t have happened at all. There’s always incentives to produce cheaper. The whole changeover process might have run a couple of decades later but would have been a lot cheaper to the consumer. And there’d be a catch-up point in the near future where they’d be no difference from the path… Read more »

M M
M M
4 months ago
Reply to  bloke in spain

The intermittency is a feature not a bug. The idea is to make energy more expensive. So no source where the intermittency can be fixed will be allowed. If they do manage to “fix” the problem (by making really cheap energy storage) then some other problem will be found with those sources to make them bad (I suspect they’re going to push birds being fried or chopped as the next problem). The people shouting about this (the “liberals”) think there are too many other humans and want there to be fewer of them. The best way to do this is… Read more »

Spike
Spike
4 months ago

“Whether we wholly believe the assertion” is essential to the point. The assertion that the elevated level of carbon dioxide will lead to a man-caused* runaway* trend of scary weather is CRAP. If, instead of CO₂, testosterone were the poison, we could have a female-only economy. The conversion would “create jobs.” Surely a Pigou tax would be more elegant than overt display of weapons. But it would be UNPRODUCTIVE. The “solution space” is open—but the problem statement has been gifted to vandals.

john77
john77
4 months ago

Today’s news includes an article somewhere that most windfarms in the UK will be uneconomic when the current subsidies expire. Quietly puncturing the assertion that wind power is cheaper. Michael van der Riet has more and better data than I so I’ll leave it to him to provide chapter and verse. More importantly the UK has been burning coal *every day since Midsummer’s Day* to fill the gap created by reliance on Wind which is, mostly, producing at less than 10% of rated capacity (despite a few peaks its average for July is less than 10% of nameplate) and sometimes… Read more »

Boganboy
Boganboy
4 months ago
Reply to  john77

I’d still argue that the simplest and cheapest means of hydrogen storage is to attach the stuff to a carbon atom. The carbon can be extracted from the atmosphere or ocean surface.

But perhaps someone will shoot me down in flames on this one sometime.

bloke in spain
bloke in spain
4 months ago

With your carbon tax Tim, I’ll just say fuck off & and the horse you road in on. For all the reasons stated many times before. A very very stupid idea.

bloke in spain
bloke in spain
4 months ago
Reply to  bloke in spain

OK. Very simply for the hard of thinking. Give a politician the ability to levy a carbon tax & the disincentive will be priced at whatever revenue the politician wants to raise. Which may be regarded indistinguishable from infinite. So if one price signal in your market is nonsense, all the price signals will be nonsense..

Spike
Spike
4 months ago
Reply to  bloke in spain

That’s right, a “revenue-neutral” carbon tax is as vanishingly unlikely as is a “one-time” wealth tax. It’s a lie that is only a clear lie after it’s too late.

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