Saturday, June 23, 2012

energy actions to seriously reduce chances of economic depression

World leaders and folks running for office are rightly focusing their
energies now on the challenge of trying
to avoid falling into a 1930's-style global economic depression. And
they rightly understand that a few
PR releases on green jobs here and there are not really part of that
economic discussion.

BUT -- energy is a major part of the world economy, and I see a bit
more clearly this morning how new
international action on energy could help.

Some actions related to transportation energy could help a lot, but we
have discussed that before (and of course
we should keep discussing it). This morning,
I have thoughts about the "other half" of that equation, the electricity side.

Could new actions on electricity really be important to the world
economic situation, in a serious way and
on a serious scale? Or, as some highly elevated economists have said,
is it "too small to deserve a place as
part of these large-scale discussions?"

IEA/OECD reported world electricity generation in 2008 to be 20,000
terawatt hours. If electricity
costs about 10 cents per kilowatt-hour (kwh) to generate today, that's
$2 trillion per year, certainly larger
than the US government annual deficit. Furthermore, that annual flow
of $2 trillion per year is based on a lot
of previous capital investment, whose benefits are spread over 10 to
50 years or so . (50 year planning horizons
are still reasonably normal in the electric power sector.) To sustain
and enhance that $2 trillion/year flow,
it is quite reasonable to talk about new investments on that scale,
whose economic stimulus and job creation
benefits could be more than enough, in principle, to shake us out of
our deep local minimum in the world

How do we bring that closer to reality?

First -- please forgive some review of the all-important context. It
is a great thing that G4 or G20 folks are talking about new financial
to reduce the chances of runs on banks, wild instabilities in
currencies or dangerous rises in the interest rates we have to pay
as EU, US and China try to work their way out of the debt positions.
But "debt" and "jobs" are equally important here.
To get out of the hole, with minimum debt risk, all three areas need
to "run the numbers" the way some Japanese economists
have done lately. For each source of government debt, X, whether on
the tax side or the spending side, we need to ask
how large the near-term job creation benefit is (while having ways to
prevent excess demand if and when we finally get to full employment).
To avoid depression, we need action on the financial and bank side,
but ALSO action on the "jobs" side, where the real
threat of global depression is rather urgent.

And so, in the EU, where the threat is now most acute, the big picture
question is: how to get more jobs in Greece, Italy and Spain,
WITHOUT throwing more money down the rat hole of the Greek government
and assorted local parasites? How
the BALANCE OUT the necessary cutbacks on one side of the ledger, with
something else to make up for the
job loss which results from those cuts?

At the level of concrete reality, down in the "weeds" where most of us
really live, I have several times suggested an obvious possibility:
shouldn't the upper level EU people (government and investors and
banks in some combinations) go for a really big investment
right now in massive construction of solar farms (billions of dollars
per year worth, to be scaled up as rapidly as possible)
in the sunny areas where solar power can be generated most cheaply? If
done right, this is cheaper than offshore wind
(20 cents per kwh) and it also buys freedom from Russian gas and from
pressure to build new nuclear plants which most Europeans
have agreed are not so acceptable.

But I have worried: are the EU people really intellectually capable of
being able to do something like that?
If they even tried... instead of deploying 13 cents per kwh solar
farms technology, will they do what I have heard
of from Spain, sending tons of money to politically connected people
who end up charging 50 cents per kwh?
In the real world, is there a possible mechanisms for making the badly
needed investment which will not
be killed by the kind of graft and "legal corruption" we see so often
in all the powerful governments of the world?

Thinking about that this morning... I see the germ of a possible way out.

Years ago, I remember when Southern California Edison (SCE) and
Pacific Gas and Electric (PGE) offered
absolute firm purchase contracts to Stirling Energy Systems (SES) and
some other companies to
buy up to something like a gigawatt of electricity at a committed
purchase price, as much as those
folks could deliver. There were other problems which got in the way,
which folks in the real world do need to think about,
but the basic idea here makes a lot of sense.

Could the EU somehow get behind a much more massive commitment to buy
all the solar electricity folks can generate,
up to a VERY large level, at 15 cents per kwh, to stay at 15 cents for
a long time to come? (Details of sunset provisions and
competition are important, but could be worked out.)

Financial people tell me the investment capital tied to a definite
market is MUCH easier to get on a large scale
than traditional VC stuff. And there is plenty of loose cash out there
right now.

The previous two paragraphs would require some thoughtful action by EU
people, and maybe some intellectual guidance here
and there, but it SHOULD be possible for the EU to make those kinds of
market guarantees, and to make sure the cash
is really there from the investment community to respond rationally
to the investment opportunity.

And for once those folks who could actually come in UNDER 15 cents
would have the level of encouragement which is socially rational.
This would help a WHOLE LOT in getting us to under-10-cents renewable solutions.

Of course, 15 cents for wind and water-based power would also be fair,
if it doesn't muck up the details
of how to make the solar be feasible. But no broader than that for
now, for many reasons (mostly obscure).
(OK: a few details. For ordinary biofuels, electricity generation is a
dead-end; there is some CO2 associated but,
more important, liquid fuels for transportation are a better use, if
the market barriers there are removed.
Municipal waste is a different matter, but the complexity cost right
now of getting it right and preventing abuse exceeds the
benefits of extending things to include it now in this particular new thrust.)

But: after the next elections... will the powers of the Republican
party help or hurt with such a fix?

For that matter, what about the role of Russians in Europe? Will
billionaire friends of Medvedev
in the gas industry try to buy out key EU politicians (as they have at
times in the past, causing huge embarrassment),
or will Putin prove he really means it about being a force for
progress concerned about the fate of the
people of Greece?

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