“These aforementioned groups and individuals are standing tall against the Climate Industrial Complex and Big Government Wind, Big Governmental Solar, Big Government Batteries, and the I-want-to-control-your-energy-life elitists. The real environmentalists speak from the grassroots, not from Washington, D.C.”
Dense energy is the most environmental, as pointed out by the late Peter Huber in Hard Green: Saving the Environment from the Environmentalists (New York: Basic Books, 1999):
The greenest fuels are the ones that contain the most energy per pound of material that must be mined, trucked, pumped, piped, and burnt. [In contrast], extracting comparable amounts of energy from the surface would entail truly monstrous environmental disruption….
The greenest possible strategy is to mine and to bury, to fly and to tunnel, to search high and low, where the life mostly isn’t, and so to leave the edge, the space in the middle, living and green.
Anderson in his article also fails to understand that the “Pro-fossil Fuel Think Tanks” are less pro-fossil fuels than they are pro-consumer, pro-taxpayer, pro-freedom, and pro-environment. The problem of massive industrial wind turbines and solar acreage is that consumers do not like them and they are bad neighbors as judged by real local grassroots environmentalists.
Back to the article. Dave Anderson provides the following list for real environmental applause:
The State Policy Network (SPN) announced on its website last month that it will focus on working with state lawmakers to prevent states from adopting wind and solar power in 2024.
SPN is the national organization that serves as the central hub of a network of affiliated think tanks located in all 50 states, and is funded by right-wing and corporate donors that include fossil fuel interests. The network also includes associate groups like the Donald Trump-aligned America First Policy Institute and multiple organizations backed by Charles Koch, such as Americans for Prosperity.
Koch is the billionaire CEO and chairman of Koch Industries, which operates in multiple sectors of the fossil fuel industry. His Stand Together Trust contributed $5 million in 2022 to SPN-affiliated think tanks and millions more to SPN associates like the American Legislative Exchange Council and Cato Institute, according to the Center for Media & Democracy.
The Energy and Policy Institute is publishing new research profiles of SPN and several affiliated think tanks involved in coast-to-coast efforts to block renewable energy projects. Highlights and links to the new profiles can be found below: State Policy Network: SPN has brought on Amy Oliver Cooke, a political consultant who previously worked for a SPN-affiliated think tank in Colorado that was funded by coal producers in Wyoming, to lead its Energy Policy Working Group.
Sponsors of SPN’s annual meeting in Chicago last year included the American Fuel & Petrochemical Manufacturers, Stand Together Trust, and the Koch-backed group Americans for Prosperity. Texas Public Policy Foundation (TPPF): TPPF, which received more than $3 million from Stand Together Trust and the Charles Koch Institute in 2021 and 2022, ran an online fundraising campaign last year that featured false claims about offshore wind farms “beaching whales” and aimed to raise $500,000.
Ten of the nineteen individuals listed on TPPF’s board of directors web page have direct financial connections to the fossil fuel industry. Caesar Rodney Institute (CRI): CRI is leading SPN’s national campaign against offshore wind power. The Delaware-based SPN affiliate received $162,500 from the du Pont family’s Longwood Foundation in 2022.
The Longwood Foundation’s president Thère du Pont is a director for the DuPont Company, which sells products used by coal and methane gas power plants, and the foundation’s chairman Charlie Copeland works for CRI. Ben du Pont chaired a $150-per-person fundraising dinner for CRI’s anti-offshore wind campaign in November.
Cascade Policy Institute: The Oregon-based SPN affiliate published a report, “Quantifying the Unreliability of Wind and Solar Power in the Northwest,” last year by Eric Fruits. Fruits is also a senior scholar for the International Center for Law & Economics, which received $500,000 in 2022 from Koch’s Stand Together Trust.
Other SPN affiliates and associate groups have also been ramping up efforts to block renewable energy The Buckeye Institute, an Ohio-based SPN affiliate, has made the Frasier Solar project and Knox County officials the latest targets of its campaign against Ohio’s Payment in Lieu of Taxes (PILOT) program.
PILOT payment arrangements provide renewable energy developers with tax certainty, while ensuring counties benefit from reliable revenue from wind and solar projects for local schools and services. Frasier Solar has faced opposition from Knox Smart Development, an anti-solar LLC that has connections to the gas industry and has used the Buckeye Institute’s flawed analysis in its efforts to derail the solar project.
The Buckeye Institute’s Board of Trustees includes Mark Jordan, the president of the gas exploration and production company Knox Energy. Jordan also serves on the board of the Kirkpatrick Jordan Foundation, which contributed $35,000 to $40,000 annually to the Buckeye Institute in recent years, according to IRS Form 990s.
The Center of the American Experiment, which received $250,000 from Koch’s Stand Together Trust in 2022, has run multiple anti-wind and anti-solar ad campaigns on Facebook. The Minnesota-based SPN affiliate also received $20,000 from Americans for Prosperity in 2021, when it published an anti-renewables report, “Not in Our Backyard,” by Robert Bryce, a leading purveyor of anti-renewable energy disinformation.
These aforementioned groups and individuals (and many more) are standing tall against the Climate Industrial Complex and Big Government Wind, Big Governmental Solar, Big Government Batteries, and the I-want-to-control-your-energy-life elitists. from the grassroots, not from Washington, D.C.
Many of us have been exasperated by the antics of Just Stop Oil protesters. Now, I believe that these are well-meaning and committed to their cause and I am sure that they think that they are trying to save the planet in the best way they can think of – gain publicity, get people talking and influence politicians.
But what would happen if we literally just stopped oil tomorrow and did without the natural resources on which the world, its economies and populations depend?
The answer: most likely six billion people would die within a year.
I am going to assume the “oil” in Just Stop Oil means fossil fuels – so oil, gas and coal. I am also going to assume that we have today’s technological knowledge and infrastructure, so we are talking about stopping fossil fuels now, not at some unspecified time in the future.
Day 1 – no more mining of coal; the world’s oil wells shut down; the world’s gas fields likewise. The first to feel the change would be gas users.
Gas stocks held above ground are typically not that high. So the UK would quite quickly, say in10 or 15 days, have to turn off its gas distribution system as it would be unable to maintain pressure.
This would mean in turn that the domestic supply would be shut down too – gas would stop flowing, and some 21 million households (74pc of the population) would no longer have heating, hot water, and cooking facilities. In their panic, people might turn to electricity for their cooking and heating, but wait…
The UK electricity grid relies on natural gas as its “buffer” energy source. Every day, demand varies according to consumer demand, and the other main energy supplier, renewables, are highly variable and can only power the grid when gas is picking up the lion’s share of the gap between their output and consumer demand.
So the moment that the main gas distribution system is de-pressurised, the grid-balancing system fails and power cuts ensue.
It is impossible to gauge how extensive these power cuts would be, but the grid would be so seriously compromised, possibly fatally, that they may be widespread and permanent.
Electricity demand would have rocketed through the switch to electric space heating, cooking and water-heating, and so it seems very likely that the sudden excess demand would be undeliverable, and therefore that the grid would spiral into uncontrollability.
No electricity means no communication systems – no mobiles, no TV, and no running water. With no power and no heating, vulnerable people start to die.
Initially just the elderly in their own homes, then in hospitals when the diesel back-up generators run out of fuel, but then new existential problems emerge for ordinary people in the form of food availability and distribution.
Day 25 – I’m probably being generous with the timing here, but diesel and petrol are likely to have run out by day 25. This means that food distribution would fail, and so the population, most of which are entirely dependent on bought food, begin to starve.
In dire national emergencies, international help is often forthcoming, but in this case, this scenario is taking place, in largely identical ways and timing, across the developed and developing world. Only isolated rural communities, agriculturally self-sufficient, would be relatively unaffected. So no international rescue mission.
Day 50 – in the urban world, many people would be near death from starvation. In the 50 days since the ending of fossil fuel supply, law and order would have broken down, and I suspect that mass conflict and slaughter would have been taking place with the increasingly desperate search for the means of survival.
But disease would be on the rampage too, with no power, no water supply and no sewage flow, so cholera, dysentery and all the other Victorian diseases of crowding would take over.
Day 100 – just three months or so since the world just stopped oil – my guess is that around half of the world’s population (say four billion people) would be dead. The first to die would be the urban poor; then the middle and upper classes, with money and status becoming increasingly irrelevant with the passage of time.
The survivors would be largely rural, able to live off local agricultural produce, or live off dwindling food stocks.
Accessing food and safe water for urban dwellers (about 55pc of the 2023 world population) would be nigh-on impossible, as all the normal distribution routes for food would have failed, and storage facilities (chillers/freezers) would also have failed without electricity.
Pumped water would be unavailable, so access to clean water would be close to impossible.
Day 365 – perhaps a further two billion people would have starved or frozen to death, leaving, say, two billion left alive; remaining food stocks would have been exhausted or spoiled, and the inevitable breakdown of law and order would have meant many would meet a violent end.
Competition for scarce resources, so elegantly solved by the invention of markets and prices, would be replaced by murder and mayhem. The means to reverse the just stop oil experiment would have gone, and the future of humans on the planet would be as insecure as at any time in human history.
The mass extinction would have robbed societies of their cultures, education and survival techniques. A new dark age would ensue.
I have summarised what is a nightmarish scenario. But everything I claim is well supported by fact. For those interested in understanding the intricate interweaving of humans and fossil fuels, I would recommend Vaclav Smil’s book How The World Really Works.
This is not a book written by someone with a particular interest in fossil fuels; it’s just a very well-balanced description of how modern civilisation actually works (as the title claims).
The world took two centuries to build the fossil-fuel based energy infrastructure. That infrastructure represents a material part of the investment savings of the world; it provides humans with huge amounts of flexible, usable energy at extremely modest cost.
This affordability has reached right down to the world’s poor and is transforming their lives – China and India being stand-out examples.
Here’s my question: do the nice, well-meaning people of Just Stop Oil understand how the world works, or not? If they do, they are nihilists; if they don’t, then why are they disrupting the smooth running of our society, promoting an extreme course of action of which they have no understanding?
If, by the way, my analysis is wrong, they should enlighten us on how an immediate ban on fossil fuels will allow civilisation to continue and flourish.
To be clear I am not suggesting that the world is forever in the grip of fossil fuels. Far from it. History tells us that human civilisation is a story of constant change.
Humans are inventive and adaptable, and fossil fuels are also finite. So in due course new, cheap, non-fossil-fuel energy sources will be developed, new ways of storing and transporting energy will be perfected, and fossil fuel use will slowly become a thing of the past; a transition from one world to another – a better one.
But I suppose the slogan, “Stop oil when the technological and economic conditions allow it, consistent with an improvement in human wellbeing and that of the planet” is not such a catchy phrase.
Neil Record is a former Bank of England economist and author of ‘Sir Humphrey’s Legacy’
To be fair, Just Stop Oil would say they merely want to stop new drilling for oil, rather than stop all production overnight.
But that would merely bring about the same results in ten years time or so, as by then most of the existing drilled reserves would be quickly drying up.
They believe that by then we will all be living happily with intermittent wind and solar power.
But what if they are wrong? It will be too late in ten years time to suddenly stand up and say “Sorry, we got it wrong. Can we have some more fossil fuels please?”
Extraordinary claims require extraordinary evidence. Carl Sagan
Summary
The Royal Society (RS) has recently released its Large-Scale Electricity Storage report that says we can provide the electricity we need using wind and solar power supported by large-scale hydrogen storage. The report makes some extraordinary claims that are interrogated by this report that also seeks to find the extraordinary evidence required to validate their claims. One positive aspect of the RS report is the painstaking analysis of the variations in wind and solar power we might expect over yearly and decadal timescales that drive the need for a very large energy store. The RS report also effectively rules out batteries as a viable alternative as a large-scale energy store.
However, the positive parts of the report stop there. They begin by assuming that electricity demand will be 570TWh in 2050 that represents roughly halving the energy demand across residential, transport and industrial and commercial categories. The evidence from Our World in Data shows that rich economies require high energy consumption to thrive. There are no rich countries with low energy consumption and those countries that have reduced energy consumption have grown more slowly, or even shrunk. The first extraordinary claim of low energy consumption fails because the evidence shows that if we allow that to happen, we will be much poorer.
The report then goes on to assume that the profile of electricity demand will be the same as today. However, as we move from gas to electricity to heat our homes and offices, the winter surge in electricity demand will be further exaggerated. Moreover, demand will change from year to year such as during the cold winter in 2010 that also coincided with a calm period when we would have generated much less renewable electricity. These variations in demand profile will lead to more generation capacity and an even bigger energy store than RS assumes, pushing up costs.
On the supply-side, the report assumes unrealistic load factors for both onshore and offshore wind. They assume that the installed capacity in 2050 will have load factors far higher than has been achieved so far. Even allowing for some technological improvements, the capacity they need to meet their low generation target will need to increase by at least 20%. This would mean a sizeable increase in the capital costs of generation to deliver their plan, pushing up the costs of wind power very significantly. In fact, the costs they assume for renewable electricity generation are three or four times lower than we pay today through Contracts for Difference (CfDs) and Feed-in-Tariffs (FiTs) and are very much lower than achieved in the latest auction round. Using more realistic assumptions about generation costs would double their weighted average generation cost to around £90/MWh.
The RS report calls for 112GW of offshore wind capacity. As discussed above, this is too low to meet their generation target which is also too low. However, low generation capacity estimate is undeliverable. Extrapolating current offshore development trends shows nearly two thirds of their offshore wind capacity target would remain unbuilt by 2050.
The report then goes on to assume efficiencies and costs for hydrogen electrolysers, storage and generation that do not stand up to scrutiny. The efficiencies are based on high-end projections of what might be achieved by 2050. These would be an enormous stretch to achieve and even if they were, the average of the installed fleet in 2050 is bound to have a lower efficiency. These lower realised efficiencies will push up the costs dramatically. They also assume no leakage of hydrogen stored underground at high pressure for a up to a decade. Assuming some leakage would push up costs further. The individual costings are all based on estimates produced before the latest inflationary surge that has pushed up the costs of everything which means the costs in today’s terms are far too optimistic. Again, even if their costs are achievable by 2050, much of the infrastructure will have to be built using today’s cost base which will push up the average dramatically.
The base-case for their financial assessment assumes a risible 5% cost of capital, lower than the current base rate. Even their sensitivity analysis that uses a 10% cost of capital is probably way too low. Investors are going to require rates of return of 15% or more to invest in immature technologies that will only ever have low load factors. It is likely that using more realistic efficiency estimates and costs of capital will at least double their base case estimates for their proposed hydrogen system.
After all that effort, the system they propose will have a very low energy return on energy invested (EROEI), meaning we will spend more than a quarter of our gross energy to produce the energy we need to live. Throughout human history, we have increased EROEI which has allowed us to thrive. This proposal takes us back to Iron Age times.
Even if their proposed energy system would produce enough to ensure a thriving society and the costs were realistic the report overlooks the human factors that would be required to deliver it. We would need thousands more skilled engineers that would not be available from abroad, because those countries would need them to complete their own projects.
Overall, the report starts with an unrealistically low estimate of future electricity demand which itself is an undesirable outcome. It then goes on to add its own unrealistic claims about the cost and efficiency of hydrogen electrolysers, storage and generation using a risible base case 5% cost of capital. In essence, the report expects us to believe we can deliver lots more renewable energy and a complete hydrogen ecosystem in 2050 for about the same as the cost per MWh of renewables in this year’s renewable auction. It’s a fantasy.
Even if it were deliverable, we would end up with an energy system near the bottom of the energy cliff producing about half the energy we need to run a modern society. It is simply not credible. The extraordinary evidence to support their extraordinary claims simply does not exist. Quite the contrary, there is a plenty of evidence that their claims are a fairy tale. Because the RS report also effectively rules out batteries as the energy storage medium to support intermittent renewables, the entire renewables project should be scrapped.
Introduction
The Royal Society recently released its Large Scale Electricity Storage report authored by Professor Chris Llewellyn-Smith saying we can meet our demand for electricity with wind and solar, supported by large-scale hydrogen storage. They claim that the cost of this approach “compares very favourably” with the cost of low-carbon alternatives. To get to their conclusions, they make some heroic assumptions and make some extraordinary claims about energy demand, generation capacity, the costs of renewables and the cost of storage required to meet net zero targets. This article examines their claims and seeks to find the extraordinary evidence required to validate their assertions.
What is good about the Royal Society Large-Scale Electricity Storage Report
Before diving into the significant weaknesses in the RS report, we should spend a little time focusing on the main positive aspect of the report. The thing that stands out most is the painstaking analysis that has been conducted to understand the very significant changes in the weather that occur on yearly and decadal timescales. They analysed wind and solar records over 37 years to estimate the level of variation we might expect from wind power. They found that we can sometimes have several consecutive years where the wind speed is lower than average. This means that if we are to have a grid powered solely by wind, solar and storage, then we need to build up massive stores of energy in the windy years to be used in the calmer years. They conclude that to consistently deliver their 570TWh of electricity each year, we would need 123TWh of hydrogen storage. Some of that hydrogen may have to be stored for a decade or more before it is used. This has important implications for the economics of storage and effectively rules out batteries as the storage medium. Who would want to spend millions on building a battery or hydrogen storage cavern, even more to fill it and maintain it, yet not see any revenue from it for years after it was completed?
Royal Society Electricity Demand Estimate
Now on to the significant weaknesses. The first thing to look at is the expected demand for electricity in 2050. The report settles on 570TWh as their estimate of demand. This is higher than the 518TWh they claim to be in the 2022 FES report, but lower than the 672TWh in the higher demand scenario of the Government’s 2020 modelling of 2050 electricity demand.
There are several problems with this as a starting point for 2050 electricity demand. First, the 2022 FES report has total electricity demand of 598-810TWh for Residential, Industrial & Commercial and Transport across their Net Zero scenarios for 2050. All these scenarios are higher, some much higher, than the 518TWh assumed in the RS report. These scenarios are much lower than other estimates for a largely nuclear-powered grid in 2050. This report arrived at 1,081TWh based on less optimistic assumptions of the efficiency gains to come from electric vehicles and heat pumps as well as allowing for economic growth and an increase in the population. For reasons discussed below, this estimate may be too low. 1,081TWh is well below the implied 1,338TWh 2050 electricity consumption target suggested by Professor Sir David MacKay set out in Sustainable Energy Without Hot Air (SEWTHA) in 2008. Table 1 below compares scenarios from different sources.
Table 1 – Comparison of Future Energy Demand Scenarios for 2050
Second, this matters because there is a strong positive correlation between per capita energy consumption and per capita GDP. There are no rich countries with low energy use (see Figure 1).
Figure 1 – Energy Use per Capita vs GDP per Capita, 2021 Selected Countries (from Our World in Data)
Halving our per capita energy use would put us on a par with countries like Mexico, Brazil, Algeria and Paraguay, all very much poorer countries. To justify halving per capita energy consumption, we need some extraordinary evidence to demonstrate it is a sustainable proposition. Indeed, as Figure 2 (again from Our World in Data) shows there is a strong correlation between reductions in per capita energy consumption and slow growth (or even shrinking economies) on a per capita basis).
Figure 2 – Change in Energy Use and GDP per Capita 2008-2021 (from Our World in Data)
To further illustrate the extreme assumptions used to arrive at the overall demand figure, the RS report assumes that we will use only 96TWh of electricity for heat and 119TWh for transport (see p17 of the report). By contrast, according to DUKES Table 4.1.1, domestic consumers and service companies used 410TWh of gas in 2021, the vast majority for heat. Industry used a further 190TWh, probably mostly in industrial processes. Even if we ignore the industrial gas, they appear to be assuming a >4-fold improvement in efficiency from the switch to heat pumps. We might expect heat pumps to perform that well in mild weather, but when it is cold and you need your central heating on, the performance gain will only be around 2.5. It looks like they are planning for us to be cold in winter.
According to DUKES Table 3.2 we used 10,941kt of petrol and 21,228kt of diesel for road transport in 2022. This works out at about 392TWh of energy. The Royal Society is assuming we need only 119TWh of electricity for road transport in 2050, a reduction by a factor of 3.3 assuming no growth in mileage. There is likely to be an improvement in energy efficiency by switching to EVs because electric motors are more efficient than internal combustion engines. However, comparing the official figures for the VW ID3 to diesel and petrol VW Golfs, shows ratio improvements of 2.4 to 3 respectively and that does not include losses in transmission and charging the battery which might be of the order 5-10%. The RS assumptions look more than a little ambitious to say the least.
It looks like the starting assumption of electricity demand is off by a factor of two. This is important, because that means they will need around twice the generating capacity and roughly twice the storage capacity they have estimated. Now let us look at some of the other assumptions.
Unrealistic Profile of Demand
The Royal Society Large Scale Electricity Storage report recognises that demand for electricity varies with the seasons. They use a model from engineering consultancy AFRY to profile the shape of demand on an hour-by-hour basis. The example they show in Figure 3 below (their Figure 1) uses demand from 1992 scaled up to the 570TWh they expect to deliver each year.
As you can see, they expect demand in July to be around 60GW each day and demand in January to be around 33% higher at around 80GW per day. However, by simply using the current electricity demand profile as their template for the future, they have ignored even larger seasonal variations in demand for gas. Of course, we use far more gas in the winter because that is when we have the central heating on. This is illustrated well in one of their references, the H21 North of England report (p15) as seen in Figure 4.
Figure 4 – Seasonal Variations in Total UK Energy Use (from H21 project)
This shows gas demand varying by a factor of five or six from around 480GWh per day (20GW) in summer to 2,400-3,000GWh per day (100-125GW) in winter. Electricity demand varies from around 600GWh per day (25GW) in summer to 960GWh per day (40GW) in winter. Transport demand is relatively stable around 1,440GWh per day (60GW). Total demand is varying from ~105GW in summer to ~210GW in winter or roughly doubling, far more than the 33% increase they assume. The H21 exaggerates the problem somewhat because some of the energy is double counted because some of the gas is also used for electricity generation. However, even after stripping out gas used for that and assuming efficiency improvements from heat pumps and EVs, there will be larger seasonal variations than they have allowed for. This means they will need more wind and hydrogen generation capacity and possibly more electrolyser capacity than they estimate to meet peak demand.
To further illustrate this point, current peak electricity demand in winter is around 45GW. Consider that 24m homes with an average 12kW heat pump operating at a COP of 2.5 on a cold mid-winter night would generate a peak demand of 115GW. That is a total of 160GW without even considering EV charging or the electrification of industrial heat. The AFRY model they use assumes a peak demand of 98.4GW and they plan for 100GW of hydrogen generators to cover it. That is clearly not enough.
Inter-Annual Demand Variation
An additional wrinkle in the RS analysis is that they appear to be assuming that demand is consistent from year to year. Whereas, when domestic and commercial heating are electrified, demand will be much higher in cold years and lower in mild years. This is illustrated in Figure 4 above when the “Beast from the East” pushed up gas demand to around 150GW. Moreover, according to the Met Office Winter 2010 was a very cold year and both 2009 and 2011 were below average. In the RS model, weather conditions meant generation would have been low in the years 2009-2011 consuming most of the store, assuming flat demand (see Figure 5).
Figure 5 – Variation in Supply Consumes Most of the Energy Store 2009-2011
It is likely that there was above average heat demand from 2009-11, with exceptional demand in 2010. If variable demand is considered, it is highly likely that the store would have been depleted, implying they need to model for a larger store. They will likely also need more renewable and hydrogen generation capacity to meet the exceptional peak demand. Both these factors will of course increase costs.
To meet their estimate of 570TWh of demand, the RS report says we would need 200GW of installed generation capacity split 80% wind (160GW) and 20% solar (40GW). The wind component would be 70% offshore (112GW) and 30% onshore (48GW). They expect this generation mix to produce on average 741TWh each year. This is more than demand, but because the supply profile of wind and solar do not match demand, storage is required and extra energy must be produced to account for the roundtrip losses in making hydrogen, storing it and then burning it to produce electricity. They assume 89.4GW of electrolyser power to make hydrogen and 100GW of generation capacity to burn it will be necessary. Note that 100GW of hydrogen generation is more than double the current thermal installed generation capacity. They also assume 123TWh of hydrogen storage capacity will be needed as well as possibly compressed air storage which is discussed further below.
Now let us go through the assumptions they have made about the load factors and efficiencies of the different components. They have used load factors for wind and taken from the 2020 BEIS Generation Costs report. Plugging in 57% for offshore wind, 34% for onshore wind and 11% for solar gives the 741TWh average generation they are seeking. However, the estimates of load factors for wind do not bear any resemblance to what has been achieved in practice. According to Energy Trends T6.1, Over the past five years offshore wind has delivered 41.0% and onshore wind 26.4% average load factors. The load factors achieved for solar are slightly below 11% but are close enough to ignore.
Various experts have predicted big increases in load factors for new developments, but these do not seem to have materialised in practice. Moreover, to achieve such high average load factors, the new installations will have to achieve load factors close to the Government’s even more ridiculous higher estimates for 2050 covered here.
Allowing for some technological improvement by assuming the 2050 installed base has average 45% and 30% load factors for offshore and onshore wind respectively, the installed generation capacity would have to increase by more than 20% to ~243GW to meet their 741TWh average target. Even this assumption might be ambitious because there is strong evidence from another GWPF report that load factors decline with age, so the lifetime average may well be lower than this assumption. The load factors above mean 136GW of offshore wind, 58GW of onshore and 49GW of solar would be needed to meet their production target. This would represent a sizeable increase in the capital costs required to deliver their plan. The extra capacity required to deliver the same output will also push up the cost of wind power very significantly (see below).
The other curious thing is that they fail to explain how their planned 40GW of installed solar capacity manages to produce peak output of nearly 80GW on many days in July (see Figure 1). There is clearly some other hidden flaw in their modelling.
Generation Cost Fantasy
The Royal Society Large-Scale Electricity Storage report uses a weighted average of ~£45/MWh (their Figure 24) in 2021 money as their base cost of wind and solar supply (including transmission costs). This compares to the actual results of ~£70/MWh for onshore wind and £63/MWh for solar (both in 2023 money) awarded in AR5. Currently, we pay ~£177/MWh for offshore wind CfDs and £110/MWh for onshore. The average FiT price which is mostly solar was £196/MWh in 2022 with current solar CfDs £106/MWh in 2023 money. Of course, no offshore wind was awarded in AR5, so we have to estimate the costs for projects with near term delivery. The Government’s 2023 estimates of the future Levelised Cost of Energy (LCOE) were taken apart here. In summary, the Government had ignored the increasing costs of turbines and rising interest rates as well as making unrealistic assumptions about load factors. That analysis arrived at a more realistic estimated cost of ~£130/MWh for offshore wind. Even if that estimate was wrong, it is clear that offshore wind costs are well above the ~£55/MWh in 2023 money suggested by the Government in the AR5 auction.
Plainly, the weighted average base generation cost of wind and solar is far higher than estimated in this report. By using the costs of onshore wind and solar in AR5 and estimating £100/MWh for offshore wind (in-line with Aldersey-Williams et al 2019), the weighted average generation cost doubles from their estimate to ~£90/MWh.
Deliverability of Generation Capacity in the Royal Society Large-Scale Electricity Storage Report
Figure 6 below compares the evolution of actual installed capacity of offshore wind, onshore wind and solar to the 2050 targets set in the RS report.
Figure 6 – Actual Renewables Capacity (MW) vs Royal Society Targets
The targets in the RS report call for 112GW of offshore wind capacity shown by the green square which is more than eight times the current 14GW capacity shown by the solid green line. The dotted green line extrapolates the linear trend of installed capacity since 2009. If this trend continues, we might get to ~40GW by 2050, about 72GW short of the target. Even if the sites for these wind farms could be found, it is very unlikely that the rate of installation could be increased to meet this target, especially when one considers that most of the existing fleet will need to be replaced by 2050 too.
With a bit of luck, we might achieve their targets for onshore wind and solar. However, this requires finding sites for these developments and persuading communities to blight their local landscapes and change the use of good agricultural land from food production to electricity production.
However, this generation capacity is only sufficient to meet the relatively meagre annual demand of 570TWh using their optimistic load factors. Using more realistic load factors as discussed above would put offshore wind further beyond reach and make the onshore wind and solar targets much less achievable. To provide the more realistic amount of energy discussed above, the generation capacity will have to at least double to meet 1,081TWh of demand with realistic load factors. There is no chance at all of any of the technologies meeting those targets.
Hydrogen System Costs
Over long timescales, there are large variations in the expected output of wind and solar. This is true on daily, seasonal and multi-annual timescales. To meet demand on a minute-by-minute basis, there needs to be a large storage capacity that can be used to generate dispatchable power. The Royal Society Large Scale Storage report acknowledges there will be a need for very short-term storage in the form of batteries, possibly slightly longer-term storage in the form of Advanced Compressed Air Energy Storage (ACAES) with the vast majority of storage provided by hydrogen in underground caverns. These will be filled in years with above average supply and used up in the leaner years. They have calculated that we will need 123TWh of hydrogen storage capacity to manage these inter-year variations in supply. The calculations supporting this requirement appear to be robust, except for again, they are based upon the low overall electricity demand of 570TWh making no allowance for inter-annual variations in demand. Approximately twice the amount of storage will be required to meet the larger estimate of demand discussed above.
Capex for Hydrogen Components
The capex requirements for electrolysers, storage and generators appear to have been understated. The RS capex estimates for electrolysers of $450/kW in 2050 are at the low end of IEA predictions for 2050 of $200-900/kW. They are also far lower than the current costs of $1,100-1,800/kWh that the IEA estimates. The IEA predictions for 2050 are based on a study from 2018 which is well before the recent inflationary wave and increase in interest rates. It is therefore likely that the estimated capex requirement for the electrolysers is far too low. Even if those cost estimates are met, the average cost of the fleet in 2050 is bound to be much higher.
Similarly, the H21 report used as the source for storage capex is from 2018 so again does not factor in the inflationary surge since 2020.
The RS report assumed £315/kWe (~$400/kWe) capex for four-stroke hydrogen-fired electricity generation is much lower than that achieved in two of the non-hydrogen projects it cites. The 76MW Goodman Energy Centre project in Kansas cost $62m which gives a cost of $816/kWe in 2008 dollars, more than twice the estimate in the RS report. After the recent inflationary surge and even allowing for some technological improvement, these costs are likely higher in 2023 money. Moreover, the 2014 600MW IPP3 project in Jordan cost $800m or $1,333/kW, more than three times the RS estimate.
It is obvious that the capex estimates in the report are far too optimistic.
Hydrogen System Efficiency
There are also significant concerns about the efficiency assumptions for the electrolysers and 4-stroke engines they plan to use to make the hydrogen and generate electricity. They assume 74% efficiency for the electrolysers. The RS report itself says the efficiency of Polymer Electrolyte Membrane (PEM) electrolysers is currently 40-67% (IRENA) or 55-60% (IEA). IRENA predicts electrolysers to hit >74% efficiency by 2050 and IEA expects 67-74% efficiency by that date. It is foolhardy to expect the full 89GW of electrolyser capacity to achieve the top-end efficiency estimates in 2050. First, these are just projections, not actual measured results and second, the fleet will have to be built over a prolonged period of time so even if the units installed in 2050 achieve the projections, the average efficiency is bound to be lower. Moreover, powering electrolysers using intermittent energy degrades their performance which will lead to lower efficiencies and probably shorter useful lives. Assuming more realistic efficiencies and shorter operating lives will increase the size of fleet required and of course significantly increase the capex and unit cost of hydrogen produced.
The RS report also assumes the generators producing electricity from the stored hydrogen is 55%. This derived from a projection published by McKinsey that shows the maximum expected efficiency of such four-stroke engines might be 55% at close to full load. However, this 2023 study suggests that a 12l V12 high-compression hydrogen engine for use in locomotives might achieve a peak efficiency of 46%. The Kansas project discussed above indicates an efficiency of 44.2%. It is unlikely that the generators will be operating at optimum load conditions at all times because they will have to vary their output according to changes in demand. Again, it seems overly optimistic to assume 55% efficiency based on just one projection when others show significantly lower results. More realistic efficiency assumptions will lead to higher costs because more hydrogen will be needed to produce the required amount of electrical energy.
Finally, they plan to store the hydrogen in underground salt caverns at 300bar and assume such caverns are gas tight. This is already carried out on a small scale for short-term storage of hydrogen at chemical plants. However, hydrogen is a tiny molecule that can diffuse through most things. Even if such a cavern is gas-tight for methane or air, it is difficult to believe that such caverns will be able to seal hydrogen at such high pressures for up to a decade without some leakage. This study from Gaffney Cline suggests leakage rates in the range 2-18%. However, the period over which that leakage is measured is not clear. They do suggest that the risk of leakage from salt caverns is lower than from other rocks such as depleted gas fields.
If there is any leakage at all, and there is bound to be, that will reduce overall system efficiency and lead to increased costs as well as potential safety concerns.
Cost of Capital
Throughout the report, they assume a default cost of capital of 5%. With the Bank of England base rate currently sitting at 5.25%, this is a risible assumption. They also discuss the impact of a 10% cost of capital. This increase in interest rates leads to the costs of making, storing and burning hydrogen going up by ~50% and pushes up the cost of ACAES significantly.
The technologies to be used in the proposed electrolysers, storage facilities and generators is immature and the planned load factors are very low. Therefore, even a 10% cost of capital is probably not enough to compensate for the level of risk being taken. An estimate of 11% current cost of capital for offshore wind was derived from the premium over long bond rates in the Government’s different Generation Cost reports. Offshore wind is a relatively mature technology whereas these hydrogen technologies are not. It would not be surprising to see investors demanding returns of 15% or more before supporting such projects. Of course, this would push the costs up even more dramatically, probably more than doubling their estimates at 5% cost of capital.
Of course, increased interest rates also push up the costs of wind and solar generation, but they have already been accounted for in the discussion above.
System EROEI
One thing missing from the Royal Society Large Scale Electricity Storage report is any discussion about Energy Return on Energy Invested (EROEI). The importance of EROEI is discussed here. Weissbach calculated the EROEI of various generation technologies in his seminal paper from 2014. Wind without backup had an EROEI of ~16 and solar at German latitudes 3.9. He then adjusted these figures to take account of the buffering or storage required to enable these technologies to deliver power on demand. The buffered EROEI of wind and solar was calculated at 3.9 and 1.6 respectively. The buffering technology he used was hydro power. There is no data specifically about the EROEI of wind and solar buffered by hydrogen. There is reason to believe it maybe even lower than Weissbach calculated because the embedded energy in 89GW of electrolyser capacity, 123TWh of storage caverns and 100GW of hydrogen-fuelled generation capacity will be very large and these systems will not generate any more net energy from the primary wind and solar sources.
Using Weissbach’s calculated buffered EROEI figures for wind and solar, the weighted average EROEI for the whole system is around 3.8. This and estimates of the EROEI of the grid in 1998, 2008 and 2021 as well as the Leading the Way scenario in the latest National Grid FES report and the nuclear dominated plan for 2050 are plotted on Figure 7 below.
Figure 7 – Royal Society Plan Falls Down the Energy Cliff
As can be seen, the Royal Society plan takes us a very long way down the energy cliff, where we are spending more than a quarter of our gross energy to produce the net energy we need to live. This is well below the economic threshold of seven assumed by Weissbach. This alone should consign the Royal Society plan to the dustbin of history.
Overall Costs Understated
Section 8 of the report pulls it all together and arrives at estimated overall system costs of electricity in 2050 using wind, solar and largely hydrogen storage supplemented by 15GWh of battery storage to maintain grid stability as shown in Figure 8 (their Figure 24).
Figure 8 – Overall Costs of Energy Projections from the Royal Society
This results in an estimate of the full system costs of electricity at ~£52-62/MWh with a 5% cost of capital and the weighted average cost of base wind and solar generation in 2021 prices of £30.20/MWh. At the top end of estimates, full system costs are in the range ~£78-92/MWh with a 10% cost of capital and base generation costs of £45/MWh. The 10% cost of capital does not seem to have been applied to the weighted average cost of the base renewable power.This report essentially says the full system cost of electricity including all the base renewable generation, hydrogen electrolysis, transport, storage, backup generation, transmission and batteries will be less than the costs achieved in AR5 in most scenarios and in most cases, cheaper than gas-fired generation today. It is a fantasy.The models they use are very complex and it is too difficult to propagate more realistic assumptions on extra capacity, increased capex, lower load factors, higher leakage rates, lower efficiencies and higher interest rates throughout. Realistic costs of the base renewable generation would double the starting baseline of £45/MWh and more realistic assumptions about the true cost of hydrogen production, storage and generation would likely at least double too. It is not too much of an exaggeration to say the actual costs would be at least double the numbers they estimate for a 10% cost of capital and £45/MWh renewable generation. This would put the total system costs over £180/MWh.Even that would be undeliverable because there is very little chance of expanding offshore wind generation at the rate required.
Human Factors
Aside from the technical and financial flaws in the Royal Society report another set of considerable difficulties need to be overcome, namely the human resources required to deliver the engineering reality. Each billion pounds of project costs will require approximately 1,000 person years of professional engineering time. Most of these engineers will have to be home produced because we cannot take them from their home countries where they will be needed to reach their own net zero targets. The materials requirements for the global net zero project will require more than a tenfold increase in the mining of key materials (including the rare earth metals) requiring even more professional engineers. The sequencing of the projects is critical, as this extra electricity needs to be available at least as fast as the deployment of electric vehicles and heat pumps. Finally, all this needs buy-in from the public, and for a start, the planning delays will thwart even the start of the projects.
Conclusions
The starting point for the Royal Society Large-Scale Electricity report is Government and NGO plans for an energy scarce world in 2050. The evidence from Our World in Data shows this will likely lead to lower GDP per capita and thus lower living standards which is clearly an undesirable outcome. This base assumption is then buttressed by flaky Government estimates of the future cost of renewable energy. These estimates are based on unrealistic assumptions of turbine costs, load factors and the costs of capital.The report then adds its own unrealistic assumptions about the cost and efficiency of electrolysers, storage and generation technologies and its base case uses a risible 5% cost of capital. Even their 10% cost of capital sensitivity analysis is probably too low. In essence the report expects us to believe we can deliver lots more renewable energy and a complete hydrogen ecosystem in 2050 for about the same as the cost per MWh of renewables in this year’s AR5.Even if it were deliverable, we would end up with an energy system near the bottom of the energy cliff producing about half the energy we need to run a modern society. It is simply not credible.The RS report shows the dangers of “official” figures propagating from one institution to another in a daisy chain. The thing is daisy chains are pretty but very fragile. Hopefully, this article has exposed that fragility and demonstrated the extraordinary evidence required to support their extraordinary claims is simply not there. Quite the contrary, there is a plenty of evidence that their claims are a fairy tale. The Royal Society report shows that their vision of 2050 does not quite violate the first law of thermodynamics, but it goes on to break all the basic tenets of sound engineering. Because the RS report also effectively rules out batteries as the energy storage medium to support intermittent renewables, the entire renewables project should be scrapped.
When disaster threatens the rational retreat, but the clown soldiers on and even doubles down, accelerating the race to oblivion.
Facts are treated with contempt; reality with derision. So it is with the grand wind and solar transition. It’s a disease of the mind that allows for the belief that a first world economy can run entirely on sunshine and breezes.
Which brings us to the clowns that are in charge of Australia’s self-inflicted renewable energy debacle.
As Sky News’ Chris Kenny outlines below, rather than reflecting and recalibrating, the idiots that pass as our political betters have decided to accelerate their mission to drive Australia into the ground, for good.
‘Green energy guinea pigs’: Albanese government ‘doubling down’ on renewables Sky News Chris Kenny 25 September 2023
Sky News host Chris Kenny says the Albanese Labor government is “doubling down” on renewables amid concerns about their impact on the Australian energy grid.
Mr Kenny’s comments come after the Albanese government announced another $70 million for a “so-called green hydrogen project” in Whyalla on Monday.
“The Bureau of Meteorology Chief Andrew Johnson says the El Nino summer poses a threat to our energy grid because it’ll be our first hot summer with so much renewable energy in the system,” Mr Kenny said.
“In other words, it’s the first hot summer since a bunch of other baseload generation has been shut down.
“The problem is the electricity grid, what we’ve done to it, and how we now don’t have enough reliable, dispatchable electricity.
“South Australia sure is at the vanguard – that’s why it has the most expensive electricity in the nation and the least reliable, no baseload generation, totally reliant on renewables, backup generators and interstate supplies – little wonder it’s the only state to have a statewide blackout.
“We are the green energy guinea pigs for the rest of the world.”
Transcript
Chris Kenny: Let me give you another insight into our ongoing national energy self-harm. National disaster management experts have gathered for a summit in Canberra, and look at this contribution from the weather bureau. The BOM chief, Andrew Johnson, says the El Nino summer poses a threat to our energy grid, because it’ll be our first hot summer with so much renewable energy in the system. In other words, it’s the first hot summer since a bunch of other base load generation has been shut down. Well done governments.
But the problem here is not the weather. We can always expect hot summers. We always have and we always will have hot summers. Just because we had a couple of mild summers doesn’t mean we didn’t all know we’d have plenty of scorches to come. The problem is not the weather. It is the electricity grid. What we’ve done to it. And how we now don’t have enough reliable, dispatchable electricity. Pretty straightforward.
We’ll always have those summers and we’ll always have air conditioners, but we can no longer rely on the energy to power them. But the Albanese Labour Government of course is doubling down on all this stuff, announcing just another $70 million today for a so-called green hydrogen project in Whyalla.
Anthony Albanese: There is an opportunity that Australia has to be a renewable energy superpower, and South Australia has been at the forefront of the transition to renewables for a long period of time. It can certainly be at the forefront of this transition to be a renewable energy superpower.
Chris Kenny: Really? “A renewable energy superpower?” You would think that a renewable energy superpower would have lots of power, energy, and South Australia sure is at the vanguard. That’s why it has the most expensive electricity in the nation and the least reliable. No base load generation in South Australia, totally reliant on renewables, backup generators, and interstate supplies. Little wonder it’s the only state to have a statewide blackout. It cost that state hundreds of millions of dollars, remember? That was back in 2016, and it plunged the state back into 1816, which just shows us what we’ve done to ourselves on energy.
Here’s what that visiting energy expert tells us about our move to a renewables plus storage model. A model I keep saying has simply not been attempted, let alone achieved, in any comparable country around the world.
Mark Nelson: If any country can do it, maybe it’s Australia. And I guess I really appreciate your sacrifice in this fairly dangerous experiment that you’re undertaking, because I don’t have to suffer the consequences.
Chris Kenny: Yeah, that’s it. We are suffering the consequences. That’s exactly it. It’s a grand experiment. Wonderful, isn’t it? We are the green energy guinea pigs for the rest of the world. Sky News
“Much of the generation named by ERCOT as qualified under their latest RFP is generation units that were recently retired, many because they could not compete with the artificially low prices that heavily subsidized wind and solar can offer, so they are still operational.”
The Electric Reliability Council of Texas (ERCOT), the planning agency for 90% of the state’s grid, has a wind/solar tiger by the tail. As the agency does not exchange power with its out-of-state neighbors to avoid federal (FERC) jurisdiction, it is looking at home for able, firm generation that wind and solar unfairly (via government intervention) put out of operation.
Background
ERCOT is (in)famous because its grid almost collapsed during Winter Storm Uri in February 2021. The Texas electricity grid had lost so many generators due to the storm that it was only 4 minutes and 37 seconds from collapsing, which would have required a restart from a “black start.” That would have left the Lone Star State without electricity for eight days or longer. ERCOT instituted emergency measures, including rolling blackouts, that saved the grid and its integrity.
As it was, hundreds of cold-related deaths and ruined lives and property otherwise represented the worst electricity (and energy) debacle in American history. Tens of billions of dollars of disputed power payments are working their way through the courts.
The state of Texas and ERCOT never want to be in that situation again.
The summer of 2023 pushed the ERCOT grid close to rolling blackouts on many evenings around 8 PM in July and August as the sun set and the wind stopped blowing, resulting in no solar power and little or no wind power. These situations occurred on many evenings during July, August, and September—with September 6, 2023, pushing the grid to a Level 2 emergency, which gave ERCOT additional resources to stabilize the grid.
Winter Preparations
To avoid more emergencies, ERCOT issued a Request for Proposal (RFP) to secure backup generation for the 2023-2024 winter. The RFP for “Firm Fuel Supply Service” would be for on-demand power generation from November 15, 2023, to March 15, 2024 with a due date of September 1.
ERCOT received proposals from five Qualified Scheduling Entities. QSEs are pre-qualified power wholesalers who buy and sell electricity on the wholesale market and act as intermediaries between individual independent generators.
The five QSEs that responded offered 32 different generating stations that could provide guaranteed backup power whenever ERCOT calls for it:
All 32 Generation Resources were entirely natural gas-fired power generation facilities and were awarded $9,000/MW (the cap established by the Public Utility Commission of Texas).
31 of the 32 Generation Resources will be backed up by fuel if natural gas is not available.
One “Generation Resource” offered natural gas storage to guarantee their ability to maintain their natural gas supply
A total of 3,319 MW of FFSR was procured with a projected total cost of procurement of $29.9 million.
By comparison, the first Firm Fuel Supply Service ERCOT obtained (November 15, 2022, through March 15, 2023) was 43% for 13% less capacity.
Since the off-peak daily clearing prices for natural gas generation averages $20 per MW, $9,000 per MW is high. However, these generators provide standby generation and guarantee it will be available whenever ERCOT calls for it.
————————-
In addition to “Firm Fuel Supply Service” above, ERCOT issued another call on October 2, 2023, for additional winter generation, titled “Request for Proposals for Capacity,” even though ERCOT considers their grid an energy-only market. Proposals are due this November 6.
ERCOT specifically highlighted that grid reliability problems had been caused by (1) load growth, (2) recent and proposed retirements of “dispatchable Generation Resources” (which means natural gas-fired generators), and (3) the possibility that recent winter weather events could be repeated:
ERCOT has determined that if the ERCOT Region experienced a winter storm during the 2023-24 winter Peak Load Season comparable to Winter Storm Elliott in December 2022, the risk of entering into an Energy Emergency Alert (EEA) during the highest-risk hour (Hour Ending 8 a.m.) would be approximately 19.9%.
This would exceed the 10% probability level that constitutes an “elevated” risk under the standard ERCOT has employed for purposes of its studies conducted in support of NERC’s winter resource adequacy assessments. While ERCOT is not projecting that EEA conditions are likely to occur, ERCOT nevertheless finds this elevated risk of EEA unacceptable. ERCOT has determined that approximately 3,000 MW of additional capacity would be needed to reduce the probability of EEA below this 10% elevated-risk threshold.
Based on the risk identified in ERCOT’s analysis, ERCOT intends to issue a request for proposals (RFP) to procure up to 3,000 MW of generation or Demand response capacity for the winter 2023-24 Peak Load Season (December 2023 through February 2024).
ERCOT identified by name the mothballed generation that qualify to respond to its RFP:
Ten named “Mothballed Dispatchable Generation Resources (as of December 1, 2023)”
Four named “Seasonally Mothballed Dispatchable Generation Resources (as of December 1, 2023)”
Seven named “Dispatchable Generation Resources that have decommissioned since December 1, 2020”.
Final Comments
ERCOT is serious about avoiding any repeats of the grid problems encountered in winter storms Uri and Elliott. Every available tool is being used to secure the necessary backup generation. Much of the generation named by ERCOT as qualified under their latest RFP is generation units that were recently retired, many because they could not compete with the artificially low prices that heavily subsidized wind and solar can offer, so they are still operational.
A better approach to the complex and expensive efforts ERCOT is going through would be for wind and solar generators to provide their own backup, enabling them to bid fairly with natural gas-fired generation. This approach would increase the value of wind and solar generation and reduce the burden placed on ERCOT to accommodate their unreliability. It would also reveal the actual levelized cost of wind and solar as being one of the most expensive forms of power generation. This approach would take the cost and operational burden off ERCOT and transfer it back to the generators where it belongs.
The world runs on luck and credit. The wind and solar ‘industries’ are running out of both. What might have sounded a little hopeful 20 years ago, sounds utterly ridiculous today. Talk about an all-wind and sun-powered future these days smacks of a mixture of delusion and desperation.
Wind turbine manufacturers are bleeding cash, with their mounting losses already in the multiple $billions. Dozens of grand offshore wind projects are being scrapped, notwithstanding last-ditch attempts by governments to salvage them.
And energy consumers have worked out the promised ‘green’ energy Nirvana is a cruel fantasy put together by cynical, profiteering elites.
As Jonathan Lesser details in this comprehensive essay, hubris and overreach are fast being overtaken by a brutal reality, based on the fact that wind and solar will never amount to meaningful power generation sources.
Why wind and solar power are running out of juice New York Post Jonathan Lesser 2 September 2023
Green energy and the push to electrify everything have been in the news recently but for all the wrong reasons.
Instead of the green energy nirvana politicians and green energy advocates have promised, economic and physical reality has begun to set in.
Start with the economic realities.
Wind turbine manufacturers like Siemens and General Electric have reported huge losses for the first half of this year, almost $5 billion for the former and $1 billion for the latter.
Among other problems, turbine quality control has suffered, forcing manufacturers such as Siemens and Vestas to incur costly warranty repairs.
In Europe, offshore wind output has been less than promised, while operating costs have been much higher than advertised.
In Massachusetts, Avangrid, the developer of the 1,200 MW Commonwealth Wind project paid $48 million to get out of its existing contract to sell power to ratepayers.
That way, the company can rebid the project next year at an even higher price.
Close by, the developers of the 1,200 MW SouthCoast Wind Project off Martha’s Vineyard will pay about $60 million to exit their existing contract.
And Ørsted, the Danish government-owned company that is developing the Southfork Wind and Sunrise Wind projects off Long Island — as well as the Ocean Wind project off the New Jersey coast — last week announced that, without additional subsidies and higher contract prices, it will have to write-off billions of dollars in potential losses.
The result: Even though Siemens Energy CEO Christian Bruch insists that “energy transition without wind energy does not work,” 2022 saw 16% less new wind-power capacity than in 2021, according to the American Clean Power Association.
Rural communities, it seems, do not want to host massive turbine farms — nor the high-voltage transmission lines needed to deliver electricity to power-hungry cities.
Then there are electric vehicles.
Ford, which has bet heavily on its electric Lightning pickup and Mustang and received a $9.2 billion government-subsidized loan in January, revealed that it has lost $60,000 for every EV it sold in the first half of this year.
Rivian, another EV company, managed to reduce its losses per EV to around $33,000, a big improvement over the $67,000 loss per EV in the first quarter of the year.
Proterra, a Bay Area-based manufacturer of electric buses and batteries that had a $10 million loan forgiven by the Biden Administration, just filed for bankruptcy.
Like the wizard in The Wizard of Oz, alternative energy proponents claim these are just temporary little potholes on the road to economic and climate nirvana — all of which can be filled with more money through renegotiated power purchase contracts and more zero-emissions mandates.
Alternative energy madness – and that’s what it is – has had its biggest impact in California.
But New York and New Jersey have adopted most of that state’s mandates.
Sales of new internal combustion vehicles will be banned beginning in 2035 in the states. All of the electricity sold to retail consumers will have to be “zero-emissions.”
Homeowners and building owners will be forced to replace gas- and oil-burning space and water heaters with electric heat pumps.
And, gas stoves will be regulated out of existence.
New York also will soon implement another California import: a carbon “cap-and-invest” program, which will impose a tax on fossil fuels sold by wholesalers and utilities.
The billions of dollars collected each year will provide a green slush fund, allowing the governor and legislators to hand out money to their politically favored cronies, as has so often been the case in the past.
Washington State began its “cap-and-invest” program in January of this year.
Instead, the program has raised gasoline prices – almost 50 cents per gallon so far this year. Washington State now claims the honor of having the highest gasoline prices in the nation: In Seattle, for example, the average price of regular gasoline is over $5 per gallon.
Of course, the entire point of the program was to raise gasoline and fossil fuel prices to encourage consumers to switch to electric vehicles, mass transit, electric heat pumps, and so forth.
But politics being what it is, Governor Inslee, along with environmentalists and legislative proponents, now blames greedy oil companies for the price increases.
‘We won’t stand for’ corporate greed,” the Governor said at a July 20, 2023, press conference.
Once New York’s cap-and-invest program starts, probably next year, you can expect a similar outcome: higher gasoline and diesel prices, higher prices for natural gas and fuel oil used to heat homes and apartment buildings, and endless political demagoguery denouncing it all.
As the push toward electric-everything powered by green energy barrels along, proponents also refuse to confront basic physical realities.
Electricity accounts for just one-sixth of all energy use.
The rest is fossil fuels consumed for transportation, space and water heating, and manufacturing.
Convert everything to electricity and electricity consumption will increase. A lot.
According to the New York Climate Action Committee’s Final Scoping Plan, New York will meet that increased demand by building almost 15,000 MW of offshore wind, like the Southfork Wind and Sunrise Wind projects, and over 40,000 MW of solar panels. (By comparison, the emissions-free Indian Point Nuclear Plant, which former Governor Cuomo forced to close, had a capacity of just over 1,000 MW.)
Because the wind doesn’t always blow and the sun doesn’t always shine, keeping the lights on will require far more backup resources.
This “reserve margin” – basically, the amount of generating capacity available to step in and meet electric demand – will need to increase from the current 20% to over 100%.
In other words, for every MW of generating capacity in 2040, there will have to be an equal amount or more in reserve.
That’s like having to buy a second car and keep it idling all the time in case the first one won’t start.
The Scoping Plan claims this will be accomplished by building over 20,000 MW of so-called “dispatchable emissions-free generating resources” (DEFRs) and installing over 12,000 MW of battery storage.
Those claims are fantasy.
Start with DEFRs, which are generators that burn pure hydrogen manufactured from surplus wind and solar power.
They have yet to be invented (we repeat – they do not yet exist). Nor do any large-scale commercial plants to manufacture green hydrogen exist either.
Hydrogen cannot be transported in existing natural gas pipelines.
An entirely new infrastructure will need to be built.
Assuming a new technology will be invented by whatever date politicians decree is foolish.
That’s not how technology works
Just ask everyone working on commercial fusion power, which has been just 30 years off for the last 50 years.
As for battery storage, 12,000 MW will provide at most 48,000 megawatt-hours of actual electricity.
That may sound like a lot but based on the New York Independent System Operator’s (NYISO) most recent forecast, on a windless and cold winter evening in 2040, it would keep the lights on for only one hour.
They also require lots of graphite, most of which comes from China – the same with the rare minerals needed for wind turbines and solar panels.
Ultimately, nothing New York does will have any measurable impact on world climate because the state’s carbon emissions are minuscule compared to the 35 billion metric tons of total global emissions.
As long as China, which accounts for almost one-third of world energy-related carbon emissions, India, and other developing nations focus policies on economic growth, rather than cutting emissions, New York’s efforts will have no environmental value.
Nevertheless, if politicians and environmentalists were serious about zero-emissions goals, they would abandon the electrification mandates, and abandon reliance on wind, solar, battery storage, DEFRs, green hydrogen, and other unrealistic and unreliable energy sources.
Instead, they would embrace the one existing technology that dare not speak its name: nuclear power.
Unlike wind and solar, nuclear plants run all the time.
New, small modular reactors will offer greater safety, lower costs, and easy scalability to meet increased electricity demand.
Storing spent fuel is a political issue, not a technological one, for which the best solution is to recycle and reuse it, as France has done for the last half-century without incident.
The country is also developing a permanent storage site for nuclear waste that can no longer be reprocessed.
The economist Herb Stein once quipped that anything that cannot go on forever, won’t.
That’s true of New York’s current alternative energy madness.
It won’t save the world, but it will grind down the state’s economy and its residents until the folly is too great to ignore. New York Post
To say tempers are running hot over climate policy related bullying and abuse of rural landowners would be an understatement.
I attended an action meeting on the 28th September in Gympie.
Katy McCallum (Kilkivan Action Group – she has featured before in WUWT) along with Jim Willmott presented disturbing footage of wholesale destruction of wilderness areas to make way for the industrial scale wind farm and solar development – vast swathes of trees cut down, corridors 10s of miles long through formerly pristine wilderness.
Wade Northausen of Billboard Battalion along with Michael Griffith of Cafe Locked Out discussed the issues they were facing in rural Victoria.
But the people I spoke to claim they were burned – burns which took weeks to heal. Sonic LRAD weapons don’t cause burns, they hurt your ears.
Perhaps something other than an LRAD was deployed. The US military developed a microwave radiation crowd dispersal weapon a decade ago, dubbed the “pain ray” in some popular press articles. The microwave weapon looks a lot like the LRAD weapon, the antenna superficially has a similar shape. The microwaves projected by the ADS weapon are not the same as your microwave oven, they are designed to be far less penetrating, to minimise the risk of injury – but they can still reportedly cause second degree burns.
Left LRAD sound cannon. author: Adam Kliczek, http://memoriesstay.com (CC-BY-SA-3.0), CC BY-SA 3.0 PL, via Wikimedia Commons. Right ADS Microwave weapon. Source US Air Force.
I don’t know for sure what happened that day, I wasn’t there – but I was horrified at first hand accounts I listened to from protestors who claim they suffered inexplicable burns.
The meeting speakers also mentioned the need to avoid excessive organisational centralisation. I contributed a little to the discussion on this issue, I said “the one thing they can’t cope with is a brush fire”. I also pointed out the tendency of European populist leaders of centralised activist groups to have unfortunate automobile accidents, which got a round of applause from the audience. The leaders I was thinking of were Austrian politician Jörg Haider, who died in an automobile accident in 2008, after his party unexpectedly won almost a third of the vote in national elections, and Britain’s Nigel Farage, who also suffered a suspicious automobile accident while campaigning for Brexit, though thankfully Farage’s accident was not fatal.
All the speakers were very careful to insist that everyone should remain within the law.
My overall impression – these are ordinary people, law abiding rural folk, who are being bullied and disrespected by government backed big green, mixed in with some vaccine freedom protestors. Some fiery things were said, but nobody, not a single person I saw speaking or spoke to afterwards, advocated any form of law breaking – other than the lockdown freedom marches they participated in. Most of the speakers very explicitly advised people not to break the law or make people feel threatened, and there were also explicit warnings from speakers to respect the privacy and families of politicians and other protest targets, and not to approach the private homes of politicians, only their official offices, if people wanted to conduct any form of protest.
A decade from now we’ll be talking about the transition to wind and solar that never happened. Right now, though, rent seekers and their enabling politicos are making claims, fast and furious about reaching net-zero carbon dioxide gas emissions targets using nothing but sunshine and breezes.
No country has ever run itself entirely on wind and solar; no country ever will. But that doesn’t stop the myth makers from pretending that the grand transition is just a giant battery or two away.
With all the substance of a Soviet 5-year plan, Australia’s Green/Labor Alliance has laid out a path that, as John Cameron explains below, looks more like a Highway to Hell.
The Incoherent Roadmap to Net Zero Quadrant John Cameron 3 September 2023
In 2021 we were confidently told that it would cost $78 billion to rewire the grid for renewables and that the average annual household electricity bill would fall by $275 under Labor because, as Anthony Albanese explained, ‘we have done the modelling’ [2].
Despite the Prime Minister’s assurances, the cost of transforming the grid by 2030 is estimated to be $1,500 billion (not $78 billion) and the full cost to 2060 is up to $9,000 billion[1]. Also, retail prices in Victoria are to increase by 25 per cent from July 2023, and more pain is in store for households and business when the hedging and contracts roll over and the doubling of wholesale electricity prices fully impact retail prices. As Nick Cater wrote “renewables vision is blind to the cost of calamity”[2].
It is time the Victorian public are made fully aware of the enormous cost of a reckless transition to renewables and the huge amount of land (up to 12 million ha) to become renewable infrastructure.
The Victorian default offer (DFO) price is set by an independent regulator to provide a simple, trusted and reasonably priced electricity option, for consumers who don’t engage in the market to find a competitive retail market offer. All electricity retailers in Victoria must offer residential or small business customers the option to take up the current Victorian Default Offer.
The DFO is expected to deliver households a $354 per year increase on 2022-23, or a 25% year on year increase, assuming there are no further increases in 2023-24. Further increases cannot be discounted, as while retail prices are up 25 per cent, wholesale prices are up 100%. Average households now face an annual electricity bill of $1,756 per year (Table 1).[3]
Note that the generation of electricity (wholesale component) only accounts for about a third of the cost and that network costs account for about another third of the total. Reaching Net Zero requires considerable investment in the two largest components of the cost of getting electricity to your home – wholesale costs and network costs. Unlike solar panels on the roof, which are ‘behind the meter’, utility scale solar and wind power in particular require a huge investment in new transmission networks.
Comparisons of renewables against existing coal- and gas-fired power typically ignore the new transmission costs for the renewables while also simplistically assuming costs for completely new coal- or gas-fired power stations, rather than the lower cost of continuing to operate the existing power stations.
Victorian wholesale electricity prices have more than doubled, from an average of $40/MWh (1999-2015) to $88/MWh (2016-23) under the Andrews Government, even after some impact from COVID lockdowns in 2020-21 (Figure 1). South Australia, the most advanced in the transition to renewables, is the canary in the coal mine as its wholesale electricity prices have consistently been Australia’s highest.
Victorian wholesale spot electricity prices by financial year
The latest Net Zero Mobilisation Report[4] modelled linear reductions to net zero by 2050 for domestic emissions and 2060 for fossil fuel energy export emissions. Six scenarios were modelled – Reference, Rapid Electrification, Slower Electrification, Full Renewables Rollout, Constrained Renewables Rollout and On-shoring (domestic iron and aluminium).
The Reference scenario [4] has no emissions objective. All other scenarios track in a straight line to net zero emissions by 2050 (domestic) and 2060 (export). None of the scenarios are forecasts, suggesting considerable uncertainty of outcomes. As Emeritus Professor Robin Batterham, Chair of the Net Zero Australia Steering Committee, has said “There are too many uncertainties to map a single path to net zero”.
The Net Zero Mobilisation Report [4] highlights what actions Australia must complete by 2030 to reach net zero by 2050. The Mobilisation Report does not consider whether we should reach net zero, nor critique past or proposed actions by governments or companies, nor express preferences. However, the Net Zero Mobilisation Report does express one preference by explicitly excluding nuclear power.
The final Net Zero Modelling Report released in April 2023 illustrates the immense scale, extreme complexity, and breakneck speed required to transition to net zero by 2050. Net Zeros predict capital investment of up to $9 trillion ($9,000 billion) on the transition in the next 37 years to 2060[4].
Funding that transition cost of $9,000 billion over 37 years requires spending $243 billion per year. To put this in perspective, it represents 36 per cent of the entire federal government budgeted expenditure for 2023-24 of $684 billion and roughly equates to the annual federal government spend on social security and welfare of $250 billion per year and more than twice the federal government expenditure of $107 billion pa on health. Have those waiting months and years for critical surgery been told this.
Spending $243 billion per year on energy transition is equivalent to spending 17 per cent of Australia’s GDP, and so far without a business case nor final investment decision report.
According to Net Zero, the transition will be among the largest and fastest economic transformations in history, with major new infrastructure required, however, progress is slower than modelled and Net Zero call for accelerated action [4]. We also have a call for accelerated action for those awaiting critical surgery!
Nick Cater[5] described the enormity of the challenge as “the irrational pursuit of renewable energy as the antidote to planetary pain must eventually confront the immutable laws of physics and the scarcity of land”.
The report by Net Zero calls for a huge list of expensive strategic actions as follows (with my comments in italic):
♦ Accelerate all options that could make a material contribution to decarbonisation. There is no rigorous cost benefit analysis, nor analysis of the opportunity costs, nor the risks of a reckless rapid transition.
♦ Clean energy and clean processed minerals should be pursued as export opportunities. Australia’s electricity costs are now well above world parity such that Australia is unlikely to be internationally competitive processing of iron ore into steel and bauxite into aluminium.
♦ Considerable land use change will be essential and requires proactive management, particularly for indigenous communities and farming communities. Up to 12 million ha of land may be required, equivalent to half of Victoria or 77 per cent of private land in Victoria. Many rural communities face acquisitions and easements, loss of scale economies in food and fibre production, and a plethora of ugly new transmission lines, wind turbines and utility solar panels.
♦ Benefit sharing must be prioritised based on principles of partnership, inclusion, and net gain. Most households are more concerned about how the costs are to be shared.
♦ Net gain for environments and biodiversity should be pursued in parallel with net zero. This suggests degrading the environment is OK provided it is in pursuit of the ideal of net zero.
♦ Minimising public impacts requires orderly asset closures, supported by multiple policy mechanisms. Government has already locked in the exit of fossil fuel generated power, prior to development of a plan for orderly asset closures and the so-called policy mechanisms are not yet supported by rigorous strategies, feasibility studies, business cases and investment decisions.
♦ Low-income households and fossil fuel regions will need support to mitigate impacts. The government will need to throw billions of everyone’s hard-earned taxes at income support and worker transition. This approach has so far failed in the Latrobe Valley where despite the Andrews Government spending hundreds of millions of your taxes, the number of jobs in the Latrobe local government area are down 8 per cent over the last decade.
♦ Private sector investment risk will be too high in many cases, unless mitigated by government. This means that net zero can only be achieved by 2050 with huge government subsidies accompanied by huge opportunity costs – we will have to forego opportunities to fix our failing health, social housing, emergency services, triple 0 and education systems.
♦ Net zero supply chains require certain, large, and a long investment pipeline. Unfortunately the current supply chain mostly traces to overseas, particularly to China where things like solar panels are made, using power derived from fossil fuels including huge imports of coal, gas and oil from Russia. Chinese imports of fossil fuels from Russia tripled immediately after the invasion of Ukraine. The reckless haste with the transition is just exporting or offshoring jobs and emissions. We need time to gear up for greater Australian domestic content of renewable components.
Options to achieve net zero The Net Zero Mobilisation Report essentially calls for the development of wide ranging options including a couple of sensible options (that may not garner support from idealistic and powerful activists), such as gas-fired peaking generation and carbon capture, utilisation and storage4:
Strengthen deployment drivers of renewables, transmission, and electricity storage.
Build a large fleet of gas-fired peaking generation to help accelerate renewable growth.
Plan and develop clean hydrogen infrastructure, including hydrogen storage.
Determine whether bioenergy has a serious role to play through research.
Ambitious energy productivity standards for new buildings, and incentives for retrofits.
Decide the future of gas distribution to household and commercial customers.
Develop plans and mechanisms for industrial decarbonisation.
Implement mandatory emissions standards for all road vehicles, and support EV charging.
Prepare carbon capture, utilisation and storage (CCUS) networks and basins for large-scale use. Private investment in a CCUS industry will require targeted government support.
Research, develop, and scale up land sector abatement pathways, policies and technologies.
Do not factor nuclear power into renewable, storage, and firming targets.
Recent analysis shows that investment in utility solar and onshore wind has slowed, and the current pipeline of projects risks falling short of the Net Zero required build rate. Offshore wind has the most uncertain pipeline and faces the highest barriers, due to the need for large subsidies and long lead times to develop initial projects, establish supply chains and provide grid access [4].
The Net Zero Mobilisation Report does not present a pre-feasibility analysis, nor feasibility reports, nor business cases nor final investment decision (FID) reports. Governments have locked in the transition timeline without completing all of these critical aspects that are vital in ensuring that your hard earned tax dollars are invested optimally, and without huge ‘opportunity costs’ – such as underspending on health, social housing, education, emergency services etc.
Australia is undertaking a gigantic socioeconomic and environmental experiment on a scale that is unprecedented, and cannot be justified given the many unknowns, the uncertainty, and considerable risk associated with the total costs and benefits. Australia’s reckless transition is unwarranted given our miniscule impact on global climate. This is particularly the case while large consumers of fossil fuels such as China, India and Russia pursue only token transitions.
As Mark Lawson puts it in his book, Dark Ages, “In order to avoid a climate crisis that never seems to arrive, activists and governments are about to plunge us all into a very real power crisis”[6]. Quadrant
[1] Net Zero Australia (2023). Mobilisation Report, July 2023.
[2] Nick Cater 2023. Renewables Vision blind to the cost of calamity, Australian, 17 July 2023.
[3] Source: AER; AEMO 2023. Annual flat tariff bill for domestic customers assuming an annual usage of 4,000 kWh.
[4] Net Zero Australia (2023), How to make net zero happen – Mobilisation Report July 2023. The Mobilisation Report has been prepared by academics at the University of Melbourne, The University of Queensland, Princeton University, and management consultancy Nous Group. Net Zero Australia is funded by gifts and grants from its sponsors: Worley, Dow, Future Fuels Cooperative Research Centre, Future Energy Exports (FEnEx) Cooperative Research Centre, APA Group and Minderoo Foundation).
[5] Nick Cater (2023). Victoria’s energy policy is all at sea. Menzies Research Centre Report, 29 March 2023
[6] Mark Lawson (2023). Dark ages, the looming destruction of the Australian power grid. Connor Court Publishing. Quadrant
World wide cargo transport concept. Vector illustration
Over the last 200 years, when the world populated from 1 to 8 billion, we learned that crude oil is virtually useless unless it’s manufactured (refineries) into oil derivatives that are the basis of the fuels to move the heavy-weight and long-range needs of more than 50,000 jets moving people and products, and more than 50,000 merchant ships for global trade flows, and the military and space programs.
Today, chemical products, such as plastics, solvents, and fertilizers, include more than 6,000 oil-based products that are essential for supporting modern lifestyles.
Recognizing that eradicating the world of oil without a replacement in mind would be immoral and evil, as extreme shortages of the products now manufactured from fossil fuels will result in billions of fatalities from diseases, malnutrition, and weather-related deaths, and could be the greatest threat to the world’s eight billion population.
The “energy conundrum is that “renewables” only generate electricity, yet most products derive from oil.
Wind turbines and solar panels can only generate intermittent electricity. They cannot manufacture any products for society.
Crude oil, on the other hand, is virtually useless unless it’s manufactured (refineries) into the fuels to move the heavy-weight and long-range needs of more than 50,000 jets moving people and products and more than 50,000 merchant ships for global trade flows basis of more than 6,000 products in our daily lives that did not exist before the 1900s, and the military and space programs.
The proverb “you can’t have your cake and eat it too” tells us that you can’t rid the world of crude oil and continue to enjoy the products and fuels manufactured from fossil fuels that can be manufactured into something usable like the fuels for the heavy-weight and long-range transportation infrastructures of ships and jets and the derivatives that make the more than 6,000 products and fuels that have made our lives more comfortable.
Globally, excluding China, about 3 million barrels per day of refining capacity closed since January 2020. The future does not bode well, as 20 percent of the 700 worldwide refineries are expected to close in the next five years, i.e., 140 closures. Further inflation and shortages in perpetuity are guaranteed, as those refineries are manufacturing the fuels for the jets moving people and products, and the merchant ships for global trade flows, of the products for society and the military and space programs.
China is coming to the rescue with Asia’s 88 new refineries for manufactured oil derivatives that are the basis of almost every product being used by mankind, as well as the manufactured fuels used by every transportation infrastructure and the military.
Like the national debt Ponzi, the shortages of the products, fuels, pesticides, and fertilizers MANUFACTURED from fossil fuels will also contribute to shortages and further inflation in perpetuity as wind turbines and solar panels are both incapable of manufacturing ANYTHING; they just generate occasional electricity.
We may have long-range plans to generate electricity from wind, solar, or nuclear fusion, but no plans to replace crude oil that is manufactured into everything in our daily lives. Thus, efforts to cease the use of crude oil could be the greatest threat to civilization, not climate change, and lead the world to an era of guaranteed extreme shortages of fossil fuel products, as we had in the decarbonized world in the 1800s, which may result in billions of fatalities from diseases, malnutrition, and weather-related deaths trying to live without the 50,000-merchant ship and 50,000 jets, that are moving more than 6,000 products currently benefiting worldwide humanity.
The American Government of 435 Representatives and 100 Senators are laser-focused on ending the “climate crisis” by switching to “clean” ELECTRICTY. It has few qualms about importing critically needed materials from foreign countries, primarily China – regardless of economic, defense, national security, ecological, or human rights implications.
The dismal track record of virtually every program implemented by the Government is broken, and most likely, the clean electricity program will have results similar to previous programs such as:
Social Security established 88 years ago in 1935 and is now broken.
Fanny Mae established 85 years ago in 1938 and is now broken.
Medicare and Medicaid established 58 years ago in 1965 and are now broken.
Freddie Mac established 53 years ago in 1970 and is now broken.
United States Department of Energy established 46 years ago in 1977 to lessen our dependence on foreign oil. Now, with 16,000 employees and a 31 billion dollar annual budget, and 46 years later, we’re importing more oil than ever!
A private industry company such Walmart, the most successful and profitable business in America with 2.2 million employees and more than 10,000 stores, may be a better choice to run any energy program being mandated. Is it time to drain the swamp and hire Walmart to run the Government?
World leaders are not cognizant enough to know that wind turbines and solar panels only generate occasional electricity and have no plans to replace the products and fuels now manufactured from fossil fuels, which are the basis of every infrastructure segment supporting the 8 billion on this planet!
It’s shocking that the media continues to refrain from asking the government leaders and policymakers of current green electricity mandates a John Stossel-styled “give-me-a-break” question: Can you imagine our world without jets, merchant ships, militaries, and space programs?
Ronald Stein is an engineer, senior policy advisor on energy literacy for CFACT, and co-author of the Pulitzer Prize nominated book “Clean Energy Exploitations.”
The recent IMF updated report on fossil fuel subsidies took on the appearance of the Mad Hatter’s tea party (Alice in Wonderland) when you look into what is claimed to be subidizing hydrocarbon energy. Robert Lyman explains the tricks and dishonesty running through this ongoing narrative against conventional energy sources, while ignoring the massive taxpayer direct funding of wind and solar power. His Financial Post article is Most fossil-fuel ‘subsidies’ aren’t actually subsidies. Excerpts later on with my bolds and added images. But my overview of the context for these remarks.
Context–Back to Basic Terms
Climate activists and renewables lobbyists are acting like Mad Hatters, twisting language and logic to pursue their agendas. Let there be some common sense injected here.
A subsidy would be when the government takes money that has been taxed, borrowed, or printed, and pays it to some company like Solyndra to do something that the market does not support. Often these subsidies subsidize technologies that do not exist and may never exist (and they say WE ignore the laws of physics.)
In contrast, a tax reduction is NOT a subsidy. A tax credit says an industry gets to keep more of its own money that it has produced selling a product people want and need in the free market.
There is a huge difference between a law that lets you keep more of your own money; and another law that actually gives you someone else’s money. The two are not the same thing. Actually, the oil industry pays higher taxation rates than other industries and subsidizes the government with the billions it pays in taxes, not the other way around.
There are also billions more in economic benefit to the nation from the jobs they create and the increased mobility and productivity people enjoy by using our transportation system based on hydrocarbon fuels.
The Big Lie: IMF counts not charging companies the full costs of global warming as a subsidy. Common sense says it isn’t
Economists are used to having their terminology misinterpreted, co-opted and misused, usually in the interests of politics. One of the most common words to suffer this fate is “subsidy.” The Gage Canadian dictionary defines a subsidy as “a grant or contribution of money, especially one made by a government.” Economists would agree with that definition. Governments, on the other hand, rarelyacknowledgethat they subsidize anything. They “invest” — though, curiously, they seldom refer to the rate of return on their investments.
I was reminded of all this by the news last week that the International Monetary Fund (IMF) has published an updated version of its 2015 Working Paper on global and country-level subsidies for fossil fuels. According to the paper, total global subsidies “surged to a record $7 trillion last year,” equivalent to 7.1 per cent of world GDP. The paper’s authors estimate that scrapping these subsidies would: prevent 1.6 million premature deaths annually, raise government revenues by $4.4 trillion and put emissions on track to reaching official global warming targets. An annex to the report indicates that in 2020 Canada’s subsidies to fossil fuels were US$64 billion, or 3.8 per cent of GDP.
The paper’s extraordinary findings are almost entirely the result of how it defines “subsidy.” It divides subsidies to fossil fuels into “explicit” and “implicit” subsidies.
Subsidies Wordplay
Explicit subsidies are the kind economists and ordinary people would recognize as subsidies: grants to cover some portion of the costs of production, as well as tax incentives and deductions (e.g., capital cost allowances) to fossil fuel producers for such things as investing in exploration and development.
By contrast, “implicit” subsidies are defined as “under-charging” producers for the environmental costs they generate from their exploration and production activities and consumers for perceived environmental costs not adequately covered by various consumption taxes (e.g., sales taxes, value-added taxes and carbon taxes).
So when, for instance, a country fails to impose a consumption tax high enough to cover the perceived costs to society of climate change, congestion or local pollution, the paper would classify that as a subsidy.
The working paper indicates that explicit global subsidies were US$450 billion in 2020, or six per cent of the total. Most of these are actually so-called tax expenditures: tax credits or deductions for investments in high-risk exploration and development activities, similar to those provided to firms in other sectors of the economy.
94% of Hydrocarbon “Subsidies’ Actually “Externalties”
That leaves the 94 per cent of subsidies that were what the paper refers to as “externalities.” Let’s be clear. Externalities are not subsidies. They are a cost or benefit of an economic activity that affects a third party not directly related to that activity. The cost is not always evident, nor is it clear by what mechanisms such costs and benefits should be shared. While the paper does not break down the percentages attributed to externalities, its 2015 predecessor estimated that the costs of global warming were 37 per cent, local air pollution 13 per cent, congestion 32 per cent, vehicle accidents five per cent and road damage two per cent. In effect, the paper is arguing that not making the fossil fuel industry pay the full cost of global warming constitutes a subsidy to the industry. The same for its not paying the full cost of local air pollution or of traffic congestion or road deaths, and so on. Attribution of any of these costs to fossil fuels is highly questionable, but one obvious question is why fossil fuels are to blame for road congestion. If all vehicles were electric, would there be no congestion?
The vast majority of what the paper calls “subsidies” thus relate to charges not imposed for the harmful external effects of consuming fossil fuels, especially in oil-producing countries that choose to impose lower excise and sales taxes on gasoline and other fuels. The paper finds that East Asia and the Pacific regions account for almost half of total global energy subsidies. In effect, the report concludes that the prices of energy should be substantially raised for the world’s poor. This, of course, was not noted in the media summaries of the paper.
The paper did not explain how it calculated Canada’s 2020 subsidies to fossil fuels but, given its general analysis, one can only assume it was based on the judgment that fossil fuel costs to consumers were not high enough. But in 2018, total taxes on gasoline alone were roughly $24 billion. One has to wonder how the IMF’s math figures that this, and the more recent increases in carbon taxes, still constitute under-charging for externalities.
A final difficulty with the IMF paper is that it excludes any consideration of the positive externalities from reliance on fossil fuels. They are the most secure, affordable, storable, and reliable energy sources we have, and the ones upon which the remarkable advances in the global economy over the last century have been based. That is well worth bearing in mind as we consider the meaning of “subsidy.”
Summary
The Mad Hatters turn things upside down. Society is subsidized and made wealthy by fossil fuels, not the other way around. Some of that wealth is being diverted to renewable energy companies who do not create enough value to be in business without direct payments of tax dollars. They prove it by declaring bankruptcy when their subsidies are reduced. Worse, hooking up wind and solar intermittent power to electrical grids adds more cost and unreliability than the renewable power is worth.
At its prime, the Carrizo Plain (S. California) was by far the largest photovoltaic array in the world, with 100,000 1′x 4′ photovoltaic arrays generating 5.2 megawatts at its peak. The plant was originally constructed by ARCO in 1983 and was dismantled in the late 1990s. The used panels are still being resold throughout the world.
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Global warming, climate change, all these things are just a dream come true for politicians. I deal with evidence and not with frightening computer models because the seeker after truth does not put his faith in any consensus. The road to the truth is long and hard, but this is the road we must follow. People who describe the unprecedented comfort and ease of modern life as a climate disaster, in my opinion have no idea what a real problem is.
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