Posts Tagged ‘economics’
a shallow dive into economics, and the discovery of a (possible) heroine
Shemara Wikramanayake, speaking at the G20 International Conference on Climate
Don’t know much about economics, to put it mildly, being constitutionally work-shy and generally impoverished in a rich country, so it seems absurd for me to occasionally buy and try to make sense of Britain’s internationally focussed mag, The Economist. To be fair to myself, it does have many interesting articles on international politics, reminding me that the bizarreries of the USA and our domestic difficulties re housing and mortgages (in Australia) are far from the most-life threatening issues on the planet. But when it comes to bond markets, IPOs, floaters, monetary policy and the like, I defer to the cognoscenti while suffering a touch of FOMO.
So, with all that, I’m going to present here an almost incomprehensible (to me) letter to the editor from the August 26 2023 issue, entitled ‘Do we need banks?’
I’m not sure what part of David Apgar’s piece on narrow banking was the most entertaining (‘By Invitation’, August 12). The idea that the ‘Chicago Plan’ was conceived with ‘the Depression fresh in mind’ must be viewed as quite original. However, almost equally amusing was Mr Apgar’s suggestion that bank lending ‘fuels credit to enterprising businesses’, when he realises that the problem with Silicon Valley Bank was that it had invested an awful lot of money in notes issued by the Federal Reserve, supposedly also to fuel commerce (and thus revealing the mockery underlying quantitative easing).
None of this has anything to do with supporting ‘enterprising businesses’ that increase prosperity. Banking is doing something else. Banks should go out and make money from the people who deposit money, assuming that they will keep it safe. Instead they are admonished to multiply paying services offered to those who trust them, and still go bankrupt. Do we need the banks or do the banks need us? And if the latter, then why do we need the banks?
I can’t really make sense of much of this, but the writer’s final ‘killer punch’ is surely ridiculous. We needed and used banks in the past because it was unsafe to keep our money ‘under the bed’ or stuffed in oversized wallets. Nowadays WEIRD society is pretty well cashless and we pay with cards or phones electronically connected to our bank accounts. How would we manage without this? And banks need us to pay for their staff, their buildings etc. Think mutual providence(?).
Of course, as someone who has never taken out a loan in my life, I was clueless about how banks make profits. And the fact is, some banks make eye-watering profits. The CEO of the ‘Macquarie Group’ (whatever that means, but I presume it includes the Macquarie Bank which I think is an investment bank, meaning it has nothing to do with me), one Shemara Wikramanayake, earned just under $24 million in the 2022 financial year, presumably due to the profitability of the ‘Group’ she heads. This is an obscene amount of money, and I find it hard to believe she lives on the same planet as myself. Her Wikipedia profile presents her and her ‘Group’ as a heavy hitter in the financing of low carbon emissions technologies, which is great, but I just don’t understand such super-massive wealth disparities…
Having said all that, my hope in starting this piece was to try and understand the concept of quantitative easing, without the apparent cynicism of the letter quoted above (its author tells us that banking ‘is doing something else’ other than supporting enterprising businesses, inferring of course that ‘banking’ is out to make money for itself, which of course is necessarily true, otherwise it wouldn’t have the funds to continue supporting other enterprising businesses). Here’s how Forbes puts it:
Quantitative easing—QE for short—is a monetary policy strategy used by central banks like the Federal Reserve. With QE, a central bank purchases securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses. The goal is to stimulate economic activity during a financial crisis and keep credit flowing.
Which leads me to further questions – what’s a ‘central bank’, what are ‘securities’, and what is monetary policy’? I’m sure I’ve heard somewhen that it’s the opposite of fiscal policy but that don’t help much.
I’m guessing that the ‘Federal Reserve’ is the USA’s equivalent of our RBA (the Reserve Bank of Australia):
‘We conduct monetary policy, determine payments system policy, work to maintain a stable financial system, issue the nation’s banknotes, operate the core of the payments system and provide banking services to the government’.
Looks like it’ll take me a while to get to QE, but safly safly catchee monkey. Here’s the RBA again:
In Australia, monetary policy involves influencing interest rates to affect aggregate demand, employment and inflation in the economy. It is one of the main economic policies used to stabilise business cycles.
Of course, I’ve heard of the RBA raising/lowering interest rates, and this affects both savings and loans, obviously. But why does this have to be fixed nationally, why can’t banks fix their own rates and let the customer decide which bank to go with? And is it necessary for private banks to follow the RBA’s decisions? (From what I’ve gleaned they don’t have to but generally keep close to the RBA’s settings). And how do interest rates affect ‘aggregate demand’ (defined as ‘the total demand for goods and services within a particular market’)? Does anybody really understand all this – apart from the magnificently named Shemara Wikramanayake?
I must admit to having only a modicum of interest (careful with that word) in the minutiae of economics, but at least my teeny research has brought to mind Ms Wikramanayake as a rare female in the world of financial movers and shakers. She’s Australia’s highest paid CEO due to the profitability of the Group she heads. Obviously I can’t speak to the economics of that, or any attached ethical issues relating to such massive profits, but these profits appear to be related largely to industries and start-ups in the field of renewable, clean energy. In a world of too many macho anti-feminist thugs like Putin, Xi and those who govern Iran, Burma and too many other countries, we need more positive, future-facing, can-do types like her.
I might actually return to trying to understand QE, corporate bonds and the like, in later posts, but maybe not.
References
The Economist, 26/8 – 1/9/2023
more on gas prices in Australia, sort of
Coal, oil and gas are called fossil fuels, because they are mostly made of the fossil remains of beings from long ago. The chemical energy within them is a kind of stored sunlight originally accumulated by ancient plants. Our civilization runs by burning the remains of humble creatures who inhabited the Earth hundreds of millions of years before the first humans came on the scene. Like some ghastly cannibal cult, we subsist on the dead bodies of our ancestors and distant relatives.
Carl Sagan
Canto: So during an English conversation group that I’m for the moment in charge of, at our local community centre, we got onto the topic of how Australia finances itself, trade and business-wise. I made the claim that manufacturing in Australia has largely died (based on the fact that I’ve worked in or for six factories in my youth and not-so-youth, – Simpson-Pope, ATCO Structures, Wilkins Servis, Tubemakers of Australia, Ellis Wireworks and Griffin Press – none of which still exist, at least not in the same locations). I also said that our economy is now based largely on the exporting of coal, gas and other mineral resources. As always, I wasn’t sure if I was talking out of my arse, so it’s time for research… But not just about that. I went on to say, apropos of our plentiful gas resources, that we export most of the gas, which is why we pay such a high price for gas domestically. This led a Chinese member of the group to ask – how come? According to him, gas, and energy bills generally, come to much less in China than they do here. So what gives? That’s what we’re going to take a look at today.
Jacinta: Yes we’ve written about this before, in November last year, but I’m happy to revisit the issue, perhaps more thoroughly.
Canto: Well, since that piece was written, there’s been little in the news about the issue, it seems. Except that, in December:
… the Australian government passed a law imposing a price cap on domestic natural gas for 12 months, with the possibility of the cap becoming permanent after that.
Which I suppose is quite important, though it was capped at a high price, presumably compared to Chinese domestic prices.
Jacinta: Well you’ve just quoted from a piece by a writer from the Baker Institute for Public Policy, based at Rice University, a private research institute based in Houston, Texas. Rather surprising to see such a piece dealing with the Australian domestic market, from the other side of the world, so to speak. And it goes into great detail about the economics of price capping, which the author, Kelly Neill, describes as ‘poor policy’, at least in this instance.
Canto: Could they have an ideological bent? What about the poor consumer? I mean the consumer who is poor.
Jacinta: I’ve just read Neill’s bio, and she’s based in Australia:
… at the University of Sydney School of Economics. Her research has focused on competition in natural gas markets, particularly in Australia. She has studied how electricity and gas markets interact, vertical integration of gas retailing and shipping, and the consequences of restricting exports of liquefied natural gas. She is also interested in electricity reliability.
Canto: Sounds impressive. In fact I feel quite intimidated now. I mean, ‘vertical integration of gas retailing and shipping’ – what could that possibly mean?
Jacinta: It’s the opposite of horizontal integration, obviously. Pay attention mate. Seriously, it’s ‘the combination in one firm of two or more stages of production normally operated by separate firms’. Presumably gas retailing and shipping in this case. And Neill’s argument is complex, it seems – it’s a long article, and its complexity is beyond our pay grade (which is zero of course). It’s the kind of economics article that’s designed to be read by other economists, and, after a quick run-through, I see little or no mention of windfall profits by gas companies, the cost to residential consumers, or renewable energy. It does discuss future investment, and she certainly appears to believe that increased development of our gas resources is a very good thing, as if she’s never heard of ‘the Big Switch’ to electricity developed from renewables.
Canto: Yes it’s odd – we’ve mentioned how Chinese newcomers to Australia are wondering why domestic energy costs are so much higher here than in China. Neill focusses, though, on the big consumers:
the intention of the natural gas price cap is to provide relief to industrial gas users
That was news to me – I thought the government wanted to provide relief to impoverished types like you and me. But perhaps they want both. And she also expresses concern that caps will reduce the incentive to produce more fossil fuels. So she certainly has a business as usual attitude to such production, while I’m trying my darnedest to get our Housing Association to put solar panels on our roofs, and to get our gas cooker and hot water system switched to electric. And, as a consumer of science mags and podcasts, all I hear from them is how we must wean ourselves from gas, oil and coal. It seems that economists think differently.
Jacinta: She also writes things that slightly surprise me:
Australians own the country’s natural resources (through their governments), and as such are entitled to benefit from their extraction.
Which sounds good, but I thought these natural resources were owned by the companies that extracted them, via mining and such. Sort of like manufacturing. General Motors makes money from cars, BP makes money from oil. And sometimes these companies receive subsidies from government, to help maintain them, because they’re good for the economy, not only because they provide relatively cheap cars, or oil, for the country, but because that business gets to export the surplus (helped in some way by government) in exchange for goods that we need but can’t easily supply ourselves.
Canto: Yeah we’re not really very good at understanding this are we? I suppose the globalisation of the economy is why we don’t do manufacturing any more. The labour costs too much? Better to use cheap overseas labour and then import? And ratchet up the gig economy so that everybody has just enough work to not count in the unemployment stats? I’m sure the coffee and croissants market is booming. But getting back to gas, my understanding is that coal is rated the worst of the fossil fuels – not only for carbon emissions but most dangerous working conditions. And then it’s oil and then gas. So maybe Neill is right to discount the negatives, at least for the foreseeable.
Jacinta: According to the IPCC, in 2018, 89% of global CO2 emissions came from ‘fossil fuels and industry’, which is kinda vague, tacking on ‘industry’ like that. I mean, can transportation be counted as industry? And according to ClientEarth, natural gas accounts for a fifth of the world’s carbon emissions. By no means insignificant.
Canto: But I’m interested in learning a bit about economic-speak, inter alia, through analysing Neill’s essay. And after all that, we’ll try to find out why Chinese people are paying less for their domestic energy than we are. So here’s a quote from early in the essay which seems to sum up her position:
Forcing companies to sell on the domestic market at a lower price reduces the value of Australia’s gas resources — an opportunity cost that ultimately does more harm than good. Instead, it would be better to maximize the value of the resource and then choose a tax policy that does not affect investment.
The term ‘opportunity cost’ is economics jargon, meaning ‘the loss of other alternatives when one alternative is chosen’, but this idea of maximising the value of the resource would surely be music to the ears of the multi-millionaire gas company owners. And clearly she’s in favour of investing in gas. If I found out that my super fund had been investing in gas I’d be effing furious.
Jacinta: I’m sure they are – it’s a transitional fuel dontcha know. And there’s no doubt that Neill is in favour of our exploiting this resource. Look at this key paragraph:
The influence of the export price in the domestic market has increased over time as gas supply in southern states has declined. State governments in New South Wales, Victoria and South Australia share responsibility for this, with bans on new developments contributing to the decline in gas production. If produced, southern gas could be sold at a discount to the LNG export price, because southern gas would be further from the export plants and closer to demand centers. Indeed, if gas supply was large enough that LNG export plants were at capacity, the domestic price would again de-couple from the export price.
As a South Australian, taking pride in our leading the country in renewables, I’m somewhat nonplussed/gobsmacked at this slap. So I should read the whole piece to see if she has any interest in or knowledge about the existential global warming crisis that is currently enveloping us, and the contribution of LNG and other fossil fuels to this crisis. But I’m not hopeful.
Canto: So next she’s on about supply issues:
Global LNG supply is inherently inflexible, because increasing liquefaction capacity is costly and slow, and the market remains illiquid, particularly in Asia.[5] Investors know that small increases in demand can create large increases in price. (The converse is also true, small declines in demand create large price falls.)
Whatever that means.
Jacinta: Yes, I’m not sure if she means that the gas remains illiquid. Gas is gas after all, not liquid. But there’s also the term ‘liquid assets’ in economics…
Canto: Yes I hadn’t noticed that. ‘Liquid Natural Gas’ is essentially self-contradictory…
Jacinta: It’s liquified natural gas. And ‘liquefaction capacity’ means ‘the capacity of an LNG facility, measured in terajoules per day, to liquefy natural gas to produce LNG’. So Neill is pointing out, I think, that there’s a market inflexibility because it’s costly to liquify gas, especially in Asia. But saying that the market remains illiquid does create a bit of confusion. But I wonder what this economist thinks of Australia’s RenewEconomy. I notice they have an essay posted a few days ago from Giles Parkinson, an indefatigable RenewEconomy journalist, entitled ‘It’s time to get SwitchedOn and kick gas out of the system: Our future depends on it‘ – SwitchedOn referring to a series about electrification they’re publishing….
Canto: But I think, to be fair, Neill is clearly aware that our economy is currently highly reliant on our gas exports, just as Norway’s economy is highly reliant on its fossil fuel exports.
Jacinta: Good point. Could we kick gas out of the domestic system while exporting endless terajoules of the stuff? Isn’t that what Norway is doing? They get most of their domestic energy from hydro.
Canto: Seems a bit hypocritical I suppose, and here in South Australia we don’t have hydro, but we’ve worked hard to get more of our energy from renewables. We’re still reliant on gas for almost half our energy, but wind and solar together make up the rest – more than half. That’s only going to increase. I’ve now read the whole of Neill’s essay, and she’s made absolutely no mention of renewables. Maybe she’s been living under a rock for the past 30 years, but most likely it’s deliberate – which doesn’t mean she’s anti. She might just have decided to limit her focus on gas.
Jacinta: Well, maybe so, but she’s clearly in favour of more investment in gas, and encouraging more exploration of the stuff. That fact that she ‘blames’ South Australia and other states for not producing more of this fossil fuel, which the IPCC is insisting we should not be producing if we’re to avoid catastrophic global warming, is evidence enough of her contempt for the science, surely.
Canto: But I’ve seen her picture and she looks so cute…
Jacinta: […]
Canto: Anyway we didn’t get round to why energy costs more here, domestically, than in China. Next time perhaps.
References
https://www.bakerinstitute.org/research/why-natural-gas-price-caps-australia-are-poor-policy
It’s time to get SwitchedOn and kick gas out of the system: Our future depends on it
Modern China and the Uyghur people
Uyghur youngsters – from the East Turkistan Australian Association
A dozen or so years ago I began teaching English at a community college in the north-west suburbs of Adelaide. I didn’t know it at the time, but the area was home to the largest Uyghur community in Australia. The word ‘Uyghur’, of course, meant nothing to me, nor did the English name they gave to their homeland – East Turkistan. My classes were filled mostly with middle-aged Moslem women, along with Vietnamese and other Asian nationalities. Some of them wore hijabs, others didn’t. They – the Uyghurs – were an interesting lot, feisty, chatty, politically aware and close-knit. Over time I learned to my surprise that they weren’t quite ‘middle-eastern’, whatever that vague term means. Or at least they were more eastern than middle, geographically speaking. Had I been forced to guess their nationality, I’d have said maybe Iraqi or Afghani – I had only a vague impression of the various ethnicities – Uzbek, Tajik, Khazak, Pashtun, and their histories of interaction and/or tension. So I was surprised to learn that the Uyghur people live within the current borders of China – specifically, a large, sparsely populated region north of Tibet, which the Chinese call Xinjiang – which translates, interestingly, as ‘new frontier’. Knowing this, of course, alerted me to the probability of tensions in the region, or worse.
This was fully confirmed when the Uyghur social worker at the community centre, with whom I’d become friendly, asked me to help her write a letter to the Australian authorities for assistance in the case of her brother, an Australian citizen, who had been incarcerated in neighbouring Kazakhstan while on a visit to his home region. She explained that the Kazakh government had long been currying favour with the Chinese authorities by rounding up anyone who might favour East Turkistan independence. She also assured me that her brother, while resistant to the brutalities of China, was anything but a terrorist, and wanted nothing more than to return to his family.
I don’t know if our letter had any impact (I very much doubt it), but everything I’ve learned about the region since has, when I’ve turned my attention to it, gripped me with the usual impotent rage I’ve felt whenever a weaker nation, or culture, or person, is harassed and bullied by a stronger one.
Uyghur is a Turkic language, most closely related to Uzbek, and many Uyghurs live in Uzbekistan, Kazakhstan and Kyrgyzstan as well as in the ‘Xinjiang autonomous region’, their principal homeland. The term ‘autonomous’ is risible these days, as the Uyghurs are under increasingly intense surveillance and pressure from their Chinese overlords. Arbitrary arrest and imprisonment is commonplace, and the number of Uyghur inhabitants has dropped from around 76% in 1949, when China annexed the region, down to 42% today. In the same period the population of Han Chinese has risen from around 6% to 40%. It’s a situation that immediately makes me think of Palestinian Arabs under the sway of the Zionist movement since early in the 20th century. To describe it as ethnic cleansing by stealth would underplay the brutality and consequent suffering.
In his very thought-provoking little book The dawn of Eurasia, Bruno Maçães provides a more subtle and certainly less emotionally-charged account of China’s modernising movement, a movement which has little patience for ethnic diversity and the preservation of traditional cultures. Of course, nations like Australia and the USA are also struggling with the rights and aspirations of traditional indigenous cultures in the light of a relentless modernism, but both of these ‘western’ nations seek to accommodate those cultures under a framework of individual freedom (more or less). Maçães notes that China’s modernist ‘dream’ is more collective, requiring everyone to ‘get with the the program’.
I should point out that Macaes is talking about the Chinese government’s dream, one first iterated by Xi Jinping, who clearly wants to make a distinction between what one might call European, or European-style, liberalism and what he personally wants his country to be. The question of what ‘the Chinese people’ actually want or have dreams about – well, it’s moot. Nobody can say, certainly not Xi.
Nevertheless Xi and his cohorts are wielders of massive power, and for the time being they’re suppressing all but their own manufactured vision of the Chinese future. Maçães writes of a document distributed within the CCP shortly after Xi’s public maundering about the Chinese dream:
It outlined the main political perils the Party leadership was urged to guard against, all of them located within the ‘ideological sphere’ and calling for an ideological response. The document started by denouncing those who replace the Chinese dream of national rejuvenation with an obverse ‘constitutional dream’, imported from the West and claiming that China should strive to catch up with the West by adopting a form of constitutional government and following Western political models. Linked to this, a second false trend attempts to promote Western values as ‘universal’, claiming that the West’s value system ‘defies time and space, transcends nation and class, and applies to all humanity’. The document then goes on to complete a full indictment of Western political ideas, including an independent civil society, economic liberalism and freedom of the press. The General Office is particularly insistent on the principle that ‘the media should be infused with the spirit of the Party’. Criticism by the media must be managed, supervision supervised. Those who deny this principle are looking to use media freedom in order to ‘gouge an opening through which to infiltrate our ideology’. By allowing mistaken ideas to spread, critics will disturb the existing consensus on which road to take and which goals to pursue, and ‘disrupt our nation’s stable progress on reform and development’.
Bruno Maçães, The dawn of Eurasia, pp125-6
This is truly chilling stuff. The chances that an ‘existing consensus’ can be found regarding China’s future are about as likely as finding proof of the existence of some god or other, and needless to say, this fake consensus finds no place for the Uyghur people or any other minority culture within China – in fact they’re clearly in the way of what the current dictatorship deems to be progress, and nothing illustrates this so well as the city of Khorgos in Xinjiang, right on the border with Kazakhstan.
If you haven’t heard of Khorgos, you’re not alone. The city didn’t exist 5 years ago, but now it’s full of skyscrapers and already has a population of 200,000. It has been built as a major component of China’s ‘Belt and Road’ economic infrastructure project, which seeks to connect with central Asia and Europe as a means of facilitating trade, cultural exchange, financial ties and the like. Ambitious young people are being attracted there in large numbers, from all over China and other distant parts. The place apparently does have a multicultural feel, but only from a high-flying, business perspective – though cheap labour from the surrounding country side (e.g the Uyghurs) is an essential part of the plan. The Belt and Road future, if it can be pulled off, will mean that freight services will be able to shift products overland from China to Western Europe in a fraction of the time and at a fraction of the cost of current maritime transport. Interestingly, China has been turning its back on seaports, due to environmental congestion and high labour costs, and building more inland cities such as Khorgos. The future, as China sees it, lies with ‘a new network of railways, roads and energy and digital infrastructure linking Europe and China through the shortest and most direct route’ (Maçães).
The Chinese government is arguing – no doubt sincerely – that its Belt and Road project will provide great opportunities for those who get on board with it, and that includes not only the Uyghur people, but the peoples of the Eurasian region, including Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, Turkmenistan, Azerbaijan, Armenia and Georgia, to name a few. This vast region is seen as a reservoir of barely-tapped economic potential, and the Belt and Road is being sold as a grand tide lifting all boats between and within Western Europe and China. But of course there are critics as well as fierce opponents. The growing presence of Chinese on the borders of and within Kazakhstan, for example, has seen protests there which have threatened the stability of the Nazarbayev regime (Nazarbayev resigned as President of Kazakhstan in March this year, but essentially still runs the country). Russia, India and a number of Western European nations have expressed grave concerns – Russia in particular is seeking to build its own rival economic network, and ‘infiltration’ of the project into Pakistan and Kashmir is creating regional tension. Obviously, any threat of a Chinese ascendancy outside its borders, given the Chinese government’s totalitarian control of its own people, is of global concern. The only way to allay those concerns, at least from a western perspective, is liberalisation within China, and a full recognition of the diversity of its people, in cultural, ideological and other respects.
Reference
Maçães, Bruno, The dawn of Eurasia: on the trail of the new world order. 2018
more on Australia’s energy woes and solutions
the SA Tesla Powerpack, again
Canto: So the new Tesla battery is now in its final testing phase, so South Australia can briefly enjoy some fame as having the biggest battery in the world, though I’m sure it’ll be superseded soon enough with all the activity worldwide in the battery and storage field.
Jacinta: Well I don’t think we need to get caught up with having the biggest X in the world, it’s more important that we’re seen as a place for innovation in energy storage and other matters energetic. So, first, there’s the Tesla battery, associated with the Hornsdale wind farm near Jamestown, and there are two other major battery storage systems well underway, one in Whyalla, designed for Whyalla Steel, to reduce their energy costs, and another smaller system next to AGL’s Wattle Point wind farm on Yorke Peninsula.
Canto: Well, given that the federal government likes to mock our Big Battery, can you tell me how the Tesla battery and the other batteries work to improve the state?
Jacinta: It’s a 100MW/129MWh installation, designed to serve two functions. A large portion of its stored power (70MW/39MWh) is for the state government to stabilise the grid in times of outage. Emergency situations. This will obviously be a temporary solution before other, slower reacting infrastructure can be brought into play. The rest is owned by Neoen, Tesla’s partner company and owner of the wind farm. They’ll use it to export at a profit when required – storing at low prices, exporting at higher prices. As to the Whyalla Steel battery, that’s privately owned, but it’s an obvious example, along with the AGL battery, of how energy can be produced and stored cleanly (Whyalla Steel relies on solar and hydro). They point the way forward.
Canto: Okay here’s a horrible question, because I doubt if there’s any quick ‘for dummies’ answer. What’s the difference between megawatts and megawatt-hours?
Jacinta: A megawatt, or a watt, is a measure of power, which is the rate of energy transfer. One watt equals one joule per second, and a megawatt is 1,000,000 watts, or 1,000 kilowatts. A megawatt-hour is one megawatt of power flowing for one hour.
Canto: Mmmm, I’m trying to work out whether I understand that.
Jacinta: Let’s take kilowatts. A kilowatt (KW) is 1,000 times the rate of energy transfer of a watt. In other words, 1000 joules/sec. One KWh is one hour at that rate of energy transfer. So you multiply the 1000 by 3,600, the number of seconds in an hour. That’s a big number, so you can express it in megajoules – the answer is 3.6Mj. One megajoule equals 1,000,000 joules of course.
Canto: Of course. So how is this working for South Australia’s leadership on renewables and shifting the whole country in that direction?
Genex Power site in far north Queensland – Australia’s largest solar farm together with a pumped hydro storage plant
Jacinta: Believe me it’s not all South Australia. There are all sorts of developments happening around the country, mostly non-government stuff, which I suppose our rightist, private enterprise feds would be very happy with. For example there’s the Genex Power solar, hydro and storage project in North Queensland, situated in an old gold mine. Apparently pumped hydro storage is a competitor with, or complementary to, battery storage. Simon Kidston, the Genex manager, argues that many other sites can be repurposed in this way.
Canto: And the cost of wind generation and solar PV is declining at a rate far exceeding expectations, especially those of government, precisely because of private enterprise activity.
Jacinta: Well, mainly because it’s a global market, with far bigger players than Australia. Inputs into renewables from states around the world – India, Mexico, even the Middle East – are causing prices to spiral down.
Canto: And almost as we speak the Tesla gridscale battery has become operational, and we’ve gained a tiny place in history. But what about this National Energy Guarantee from the feds, which everyone seems to be taking a swing at. What’s it all about?
Jacinta: This was announced a little over a month ago, as a rejection of our chief scientist’s Clean Energy Target. Note how the Feds again avoid using such terms as ‘clean’ and ‘renewable’ when it talks or presents energy policy. Anyway, it may or may not be a good thing – there’s a summary of what some experts are saying about it online, but most are saying it’s short on detail. It’s meant to guarantee a reliable stream of energy/electricity from retailers, never mind how the energy is generated – so the government can say it’s neither advocating nor poo-pooing renewables, it’s getting out of the way and letting retailers, some of whom are also generators, deliver the energy from whatever source they like, or can.
Canto: So they’re putting the onus on retailers. How so?
Jacinta: The Feds are saying retailers will have to make a certain amount of dispatchable power available, but there is one ridiculously modest stipulation – greenhouse emissions from the sector must be reduced by 26% by 2030. The sector can and must do much better than that. The electricity sector makes up about a third of emissions, and considering the slow movement on EVs and on emissions reductions generally, we’re unlikely to hold up our end of the Paris Agreement, considering the progressively increasing targets.
Canto: But that’s where they leave it up to the private sector. To go much further than their modest target. They would argue that they’re more interested in energy security.
Jacinta: They have a responsibility for providing security but not for reducing emissions? But it’s governments that signed up to Paris, not private enterprises. The experts are pointing this out with regard to other sectors. More government-driven vehicle emission standards, environmental building regulations, energy efficient industries and so forth.
Canto: And the Feds actually still have a renewable energy agency (ARENA), in spite of the former Abbott government’s attempt to scrap it, and a plan was announced last month to set up a ‘demand response’ trial, involving ARENA, AEMO (the energy market operator) and various retailers and other entities. This is about providing temporary supply during peak periods – do you have any more detail?
Jacinta: There’s a gloss on the demand response concept on a Feds website:
From Texas to Taiwan, demand response is commonly used overseas to avoid unplanned or involuntary outages, ease electricity price spikes and provide grid support services. In other countries, up to 15 per cent of peak demand is met with demand response.
Canto: So what exactly does it have to do with renewables?
Jacinta: Well get ready for a long story. It’s called demand response because it focuses on the play of demand rather than supply. It’s also called demand management, a better name I think. It’s partly about educating people about energy not being a finite commodity available at all times in equal measure…
Canto: Sounds like it’s more about energy conservation than about the type of energy being consumed.
Jacinta: That’s true. So on extreme temperature days, hot or cold – but mostly hot days in Australia – electricity demand can jump by 50% or so. To cope with these occasional demand surges we’ve traditionally built expensive gas-based generators that lie idle for most of the year. For reasons I’m not quite able to fathom, at such extreme demand times the ‘spot price’ for wholesale electricity goes through the roof – or more accurately it hits the ceiling, set by the National Energy Market at $14,000 per MWh. That’s just a bit more than the usual wholesale price, about $100/MWh. Demand management is an attempt to have agreements with large commercial/industrial users to reduce usage at certain times, or the agreements could be with energy retailers who then do deals with customers. Of course, bonuses could be handed out to compliant customers. The details of how this offsets peak demand usage and pricing are still a bit of a mystery to me, however.
Is wind power prohibitively expensive? Apparently not
that’s a bloody big blade
Recently I heard retiring WA liberal senator Chris Back being interviewed, mainly on funding for Catholic schools, on ABC’s breakfast program. He was threatening to cross the floor on the Gonski package, but while he was at it he took a swipe at wind power, claiming it was heavily subsidised and not cost effective. Unfortunately I’ve not been able to find the whole interview online, to get his exact words, but as someone interested in renewables, and living in a state where wind power is prominent, I want to look more carefully at this issue.
On googling the question I’ve immediately been hit by link after link arguing that wind power is just too expensive. Is this a right-wing conspiracy? What are the facts? As I went deeper into the links – the second and third pages – I did become suspicious, as attacks on wind power spread to solar power and renewable energy in general. It seems there’s either a genuine backlash or there’s some manipulating going on. In any case it seems very difficult to get reliable, unbiased data one way or another on the cost-effectiveness of this energy source.
Of course, as with solar, I’m always hearing that wind power is getting cheaper. Thoughts off the top of my head: a standard wind farm of I don’t know how many units would be up-front quite expensive, though standardised, ready-tested designs will have brought per unit price down over the years. Maintenance costs, though, would be relatively cheap. And maybe with improved future design they could generate power at higher wind speeds than they do now. They seem to be good for servicing small towns and country regions. How they work with electricity grids is largely a mystery to me. There’s a problem with connecting them to other energy sources, and they’re not reliable enough (because the wind’s not reliable enough) to provide base-load power. I don’t know if there’s any chance of somehow storing excess energy generated. All of these issues would affect cost.
I also wonder, considering all the naysayers, why hard-headed governments, such as the Chinese, are so committed to this form of energy. Also, why has the government of Denmark, a pioneering nation in wind power, backed away from this resource recently, or has it? It’s so hard to find reliable sources on the true economics of wind power. Clearly, subsidies muddy the water, but this is true for all energy sources. It’s probably quixotic to talk about the ‘real cost’ of any of them.
Whatever the cost, businesses around the world are investing big-time in wind and other forms of renewable energy. In the US, after the bumbling boy-king’s highly telegraphed withdrawal from the Paris agreement, some 900 businesses and investors, including many of the country’s largest firms, signed a pledge to the UN that there were still ‘in’. The biggest multinational companies are not only jumping on the bandwagon, they’re fighting to drive it, creating in the process an unstoppable global renewable energy network.
The Economist, an American mag, had this to say in an article only recently:
In America the cost of procuring wind energy directly is almost as cheap as contracting to build a combined-cycle gas power plant, especially when subsidies are included…. In developing countries, such as India and parts of Latin America and the Middle East, unsubsidised prices at solar and wind auctions have fallen to record lows.
Australia’s current government, virtually under siege from its conservative faction, is having a hard time coming to terms with these developments, as Chris Back’s dismissive comments reveal, but the direction in which things are going vis-à-vis energy supply is clear enough. Now it’s very much a matter of gearing our electricity market to face these changes, as soon as possible. Without government support this is unlikely to happen, but our current government is more weakened by factionalism than ever.
Australia is 17th in the world for wind power, with a number of new wind farms becoming operational in the last year or so. South Australia’s push towards wind power in regional areas is well known, and the ACT is also developing wind power in its push towards 100% renewable energy by 2020. Australia’s Clean Energy Council provides this gloss on the wind energy sector which I hope is true:
Technological advances in the sector mean that wind turbines are now larger, more efficient and make use of intelligent technology. Rotor diameters and hub heights have increased to capture more energy per turbine. The maturing technology means that fewer turbines will be needed to produce the same energy, and wind farms will have increasingly sophisticated adaptive capability.
The US Department of Energy website has a factsheet – ‘top 10 things you didn’t know about wind power’, and its second fact is bluntly stated:
2. Wind energy is affordable. Wind prices for power contracts signed in 2015 and levelized wind prices (the price the utility pays to buy power from a wind farm) are as low as 2 cents per kilowatt-hour in some areas of the country. These rock-bottom prices are recorded by the Energy Department’s annual Wind Technologies Market Report.
As The Economist points out, in the article linked to above, Trump’s ignorant attitude to renewables and climate science will barely affect the US business world’s embrace of clean energy technology. I’m not sure how it works, but it seems that the US electricity system is less centralised than ours, so its states are less hampered by the dumbfuckery of its national leaders. If only….
the renewable energy juggernaut
There is more global investment in solar power today than there is in fossil fuels. We’re talking about hard-headed investment for profit by business and governments worldwide, not greenies or special interest groups. And another interesting factoid: China today is generating more energy from wind power than the whole of Australia’s energy production. Not to mention the Chinese government’s massive investment in other renewables. That’s info I got from a recent ABC Science Show podcast. Renewable energy really is making inroads, and this is most encouraging for those around the world fighting the damaging environmental effects of mining and fracking in their regions, though it’s clear that such operations are dying hard.
I remember some time ago at a meeting of skeptics (not climate change ‘skeptics’, just regular sciencey anti-quackery, anti-UFO-type skeptics), when I was spruiking the virtues of wind power, so successfully taken up here in South Australia, being told dismissively that it was too expensive to be really viable. However, wind-power only really has establishment costs. Ongoing costs are quite minimal. Furthermore, a research group conducted by the Carnegie Institution for Science’s Global Ecology Department has recently conducted the most wide-ranging expert survey on wind (or any other) energy. Sure, it was a survey of those already heavily invested in wind, but that does make them the experts in the field. Predictions about the cost of wind energy into the future were based on two approachess. First, a projection into the future of falling costs over the past three decades or so – what they call the ‘learning curve’. One would assume those projections would vary from ‘most optimistic’ to ‘most pessimistic’, with consensus somewhere in between. The second approach involved a ‘bottom-up engineering assessment’, looking at the costs of individual turbine components into the future. Science Daily has summarised the findings:
On average, the participants expected wind power costs to continue falling for the next several decades, for three major classes of wind turbines, both onshore and offshore, with prices falling by 24-30% by 2030, and 35-41% by 2050.
Meanwhile governments worldwide are getting on board in a determined effort to drive down the cost of solar. Vox Energy & Environment reports on the US target:
…the US Department of Energy has a program, the SunShot Initiative, devoted entirely to driving down the cost of electricity generated by solar panels — the target is solar power with $1 per watt installed costs by 2020, a 75 percent reduction in costs from 2010.
It’s hard to get the head around the growth of solar energy worldwide since about 2007. It’s been a whirlwind ride, but starting from an extremely low level. And in the US since 2012, large or utility-scale solar has been growing faster than domestic, rooftop solar, and with falling prices and increasing module efficiency, the growth trend in big and small solar should continue well into the future. Yes, there’s government stimulus, but solar is being seen more and more as a sound investment on its own terms. Solar’s steady growth also makes for sound investment against the high volatility of the natural gas market. And this of course is just as relevant for many regions outside the US.
I’ll be taking another look at Australia’s situation, while many of our governments bicker and focus elsewhere, in an upcoming post.
More impressions of Budapest, mainly
Matthius church, Buda. Supposedly first associated with ‘Saint Stephen’, Hungary’s first Christian king, in the early 11th century, it was largely built in the late 14th century and much-restored in the 19th. Its style is over-the-top late gothic – sort of steampunk sans irony
Once we’d checked in, we didn’t much want to leave the air-conditioned comfort for the cold and damp, so we settled in at the hotel bar for a bit. I’d decided to over-dress to cheer myself up – fancy tie and colourful waistcoat, etc – so this elicited discomforting looks from the definitely not over-dressed bar people, and even smirks and laughter from passers-by when we decided to brave the weather and try out an ATM down the road. When a particularly attractive damosel made some obviously mocking remark about me to her beau I was stung into trying out a charming French greeting, but she ignored me. Our ATM venture was also unsuccesful, it would only spit out Magyar currency, aka forints. Still I was beginning to warm to the city, as I noticed a lot of attractive, interesting-looking young people on the streets, all dressed mostly in black. This was probably because, as I discovered next day, the city’s principal university was very close by.
The next day was slightly warmer and drier, and we went for a walk to the nearby museum, an absolutely massive building which was closed, and only open a few days a week – a bad sign I thought. The university precinct, though, gave me the sense of lively Enlightenment that all such areas do. We took some lunch in a pub across from the hotel, after which I took a stroll down to the nearby Danube, where I discovered a lively cafe hub, just one street back from the river, jammed between the usual tall, tightly-packed examples of Euro-impressive architecture. By which time I’d decided I really liked Budapest, but I’m probably more easily pleased than most.
There were a few touristy/traveller problems though. The flight had affected my normally regular sleep pattern, and two weeks into the holiday I still haven’t regained any sleep normalcy (I’m writing this at 3am in Amsterdam), and my cash-flow concerns weren’t alleviated by another ATM failure. This time I’d pre-located nearby a so-called ‘Euro-ATM’ via GPS on my phone but when I got there I couldn’t make any sense whatsoever of its instructions, and I ended up withdrawing a massive number of forints – something like 400,000 of the buggers – thinking I’d receive euros. This is no doubt the closest I’ve come to being a demi-millionaire in my life, but I felt more like a bloody idiot, with a pocket stuffed with a wad of currency that would be practically useless to me within 24 hours. My stress about this caused my first contretemps with my TC, who decided to shop for something warm to wear, in consideration of the somewhat unexpected chilliness, and so left me waiting longtemps outside stanping my feet and sensing the beginnings of a cough and a ‘bubbly dose’, when all I wanted to do was get to a bank that would turn my unearned forints into a maximum of euros. So after an all-too-familiar nasty spit-spat I stamped off to a bank. I’d been warned off having dealings with money exchangers, whose shingles were all over the place, because they apparently charge extortionate commissions, but in the bank I was advised by a friendly young teller in perfect English to use a money-changer down the road who charged no commission and whose rates were much better than the bank’s. This sounded all very helpful and civilised and I followed the young man’s directions precisely and with alacrity until I came to a kind of hole-in-the-wall booth advertising no commission and told my tale to a solemn-looking university type who very carefully counted out my great bundle of forints, typed a formula into a calculator and asked me silently to approve the result, some 800-odd euros, which I could only pretend to know was correct. But I really did feel enormous gratitude that these people seemed to be on my side, if that’s not too self-indulgent a term. Shortly after leaving the hole-in-the-wall with great relief, I stopped as my heart skipped a beat – should I have ‘tipped’ the fellow for his good sevices? I must say I can’t stand the stress and strain that tipping and haggling and such things causes. I’m no good at either, and I’m sure it’s not just a matter of inexperience. It’s just not a fair system – I would rather that people charged plainly and were paid appropriately, so I don’t have to fret about it…
Anyhow, I was happily cashed-up and ready to start the cruise….
Pourquoi science? – inter alia
So as I approach my sixtieth year I’m in a mood to reflect on my largely wasted, dilettantish life (at least seen from a certain perspective… ).
It seems to me that my two older siblings and I were largely the products of benign neglect, if that’s not too unfair to my parents, who seemed largely pre-occupied with their – highly dysfunctional – relationship with each other. Anyway this neglect had its advantages and disadvantages, and it was offset by at least one key decision of my mother (by far the dominant parent). She had us taken to the local library once a fortnight to borrow books, and there were always books aplenty in the house, including at least two sets of encyclopaedias. So from the age of six or seven until I left home, the local libraries became a haven.
From almost the beginning though I felt a difference between learning, which was a thrill, and school, which I suffered in silence. My first strong memory of school comes from grade one, when I was five or six. My teacher asked me to read from our class reader and I had to tell her that I’d forgotten to bring it from home. She blew up at me. ‘You’ve forgotten it again! What’s the matter with you? How many times have I told you,’ etc etc. I was extremely humiliated. I was learning that I was vague, forgetful, disorganised, and it was all too true. Shortly after this, I arrived at school and discovered I’d forgotten my reader again. I was so scared I hid in the bushes until break time, when I rejoined the class unnoticed, apparently (though probably not). I remember the sense of being defiant and tricksterish.
It’s funny that I’m now a teacher who checks students’ homework and has to admonish those who don’t do it, because as a kid in primary school and later in high school, when the issue loomed much larger, I never did any homework. Not once, ever. I even got caned for it in high school. And suffered endless screaming fits from my mother when the matter was reported back to her. I remember many sleepless nights fretting about how to survive the next day’s questioning, but still I was unable or unwilling to comply. I spent a lot of my school days staring out the window, daydreaming of freedom. One day I watched a tiny bird – a hummingbird, I thought, but we have no hummingbirds in Australia – hovering a bit driftily above some bushes, for ages and ages. What an ability, what a perspective it had! And yet it felt constrained to hover there. Maybe only humans could free themselves from these ‘natural’ constraints.
I concocted an idea for a novel, which I confided to my sister, of schoolkids rising up and throwing out the teachers, establishing an ‘independent state’ school – an idea I probably took from Animal Farm. She was very enthusiastic, probing me on the details, assuring me it would be a best-seller, I would become famous. I became briefly obsessed with contemplating and planning the takeover – the secret meetings, the charismatic leader, the precisely organised tactics, the shock and dismay of our former masters, the nationwide reaction – but of course I soon stumbled over the outcome. Surely not Animal Farm again?
I learned over time that Elizabeth, our town, was the most working-class electorate in South Australia, with the largest percentage of labor voters in the state, and possibly even the country. Of course, one had to take pride in being the biggest or the most of anything, but what did it mean to be working-class? Was it a good or a bad thing? Was our family more or less working-class than our neighbours? I was discovering that interesting questions led to more questions, rather than to answers. That, as Milan Kundera wrote, the best questions didn’t have answers, or at least not final ones. Of course, the provisional answer seemed to be that it wasn’t good to be working class, or middle class, or upper class, but to move beyond such limitations. But I was learning, through my library reading, which increasingly consisted of Victorian English literature for some reason, that class wasn’t so easy to transcend.
I continued to struggle as my schooling moved towards the pointy end. Classmates were dropping out, working in factories, getting their first cars. I was wagging school a lot, avoiding the house, sleeping rough, drinking. My older brother started an economics degree at university, probably the first person in the history of my parents’ families to do so as the prospect of university education was opened up to the great unwashed, but I was unlikely to be the second. I recall wagging it one afternoon, walking to the end of my street, where the city of Elizabeth came to an abrupt end, and wandering through the fields and among the glasshouses of the Italian marketers, armed with my brother’s hefty economics textbook, and getting quite excited over the mysteries of supply and demand.
And so it went – I left school, worked in a factory here, a factory there, went on the dole, worked in an office for a while, got laid off, another factory, moved to the city, shared houses with art students, philosophy students, mathematics nerds (whom I loved), wrote volumes of journals, tried to write stories, ritually burned my writings, read philosophy, had regular bull sessions about all the really interesting things that young people obsess about and so on and on. And I haven’t even mentioned sex.
I’d always been hopelessly shy with the opposite sex and wrote myself off as eternally poor and inadequate, but I loved girls and fantasised endlessly. I felt guilty about it, not because I thought it immoral – I never had any moral qualms about sex, which made it all the more easy to dismiss religions, which all seemed to be obsessed with regulating or suppressing it. I felt guilty because sexual daydreaming always seemed the lazy option. I was like Proust’s Swann, I would tire easily from thinking too much, especially as those great questions never had any easy or final answers. So I would give up and indulge my fantasies, and even the occasional unrequited or unrealistic passion for real female acquaintance. I remember hearing of a celebrated mathematician who would wander homeless around the USA I think it was, couchsurfing at the homes of mathematical colleagues male and female, inspiring them to collaborate with him on mathematical papers, so that he held a record for the most papers published in peer-reviewed journals. An attractive female colleague laughed at the idea of an affair with him, because apparently everyone knew he was entirely asexual, had never been heard to even mention sex in his life… Could this be true, I wondered, and if so, how could I create for myself a brain like his? It seemed to me that Aristotle was right, the pleasure derived from certain types of contemplation was greater than sexual pleasure (though dog knows I’d hate to forgo sex). I’d experienced this myself, grappling with something in Wittgenstein, reading a passage over and over until an insight hit me and set me pacing around my bedroom all night long talking to myself. But maybe it was all bullshit.
So now to get to the heart of the matter – pourquoi science? As a youngster I read novels, and sometime works of history – one of my first big adult books was a very good biography of Richard III, which I read at 14, and which came flooding back when Richard’s body was miraculously discovered recently. But I never read science. At school I quickly lost track of physics and mathematics, while always being vaguely aware of how fundamental they were. Through philosophy in my early twenties I started to regain an interest, but generally I’d resigned myself to being on the arts side of the great divide.
One book, or one passage in a book, changed this. The book was Der Zauberberg, or The Magic Mountain, by Thomas Mann, which I read in 1981. This was the story of Hans Castorp, a young man in his mid-twenties, as I was when I read it. As a tubercular patient, he was sent to a sanitarium in the Alps for a period of enforced idleness, where he encountered a number of more or less interesting characters and was encouraged to grapple with some more or less interesting ideas. Wrapped up on his loggia, he was reading some books on fundamental science, and fell into contemplation, and in a passage of some fifteen pages he asked himself two fundamental questions, both of which branched off into a whole series of sub-questions (or so I remember it). They were: What is life? and What is matter? And there was something about the way Mann animated this Castorp character, as ordinary a fellow as myself, and made me identify with his questioning and his profound wonder. It just flipped a switch in me. These were the questions. They could easily fill several lifetimes. No reason ever to be bored again.
I immediately went out and bought my first ever science magazine, Scientific American, and throughout the eighties I bought each monthly issue and read it cover to cover, not always understanding it all of course, but gradually building up a general knowledge. Later I switched to New Scientist, and nowadays I read the fine Australian magazine Cosmos, as well as listening to science podcasts and reading the odd blog. I’m far from being a scientist, and I’ll never have more than a passing knowledge – but then, that’s all that even the most brilliant scientist can hope for, as Einstein well knew.
But here’s the thing – and I’ll expand on this in my next post. It’s not science that’s interesting – science is just a collection of tools. What’s interesting is the world. Or the universe, or everything. It’s the curiosity, and the questions, and the astonishing answers that raise so many more questions. For example – what is matter? Our investigations into this question have revealed that we know bugger all abut the stuff. And when we were young, as a species, we thought we knew it all!
Next time, I’ll focus more deeply on science itself, its meaning and its detractors.
