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Some Unfriendly Economic Comments on Another Green Fantasy: Roadmap 2050

Professor Ferdinand E. Banks
ferdinand.banks@telia.com
April 21st, 2010

According to Hughes Belin (2010), “Tout Brussels” gathered on Tuesday (April 13) for the presentation of ‘Roadmap 2050’, by which he meant the flamboyant occasion on which the European Climate Foundation (ECF) – a so-called think tank – unveiled still another green fantasy about how Europe could be decarbonised for little more than lunch money. As will be noted later, what we are be talking about here could necessitate deploying trillions of U.S. dollars, however the point is that once the investments proposed in the roadmap are carried out, and Europe’s existing energy infrastructure is replaced with certain low carbon alternatives, electricity prices in the long term will supposedly be constant, and dangerous levels of climate change can be avoided. Put somewhat more technically, (discounted) short-term costs, though high, will be at least compensated for by (discounted) long-term benefits.

In case you have forgotten your theoretical welfare economics, the mathematical and economic details of this arrangement are straightforward, albeit tedious, and once we leave the classroom for the real world, we might encounter some very disturbing prospects. However the environmental correspondent of the influential Financial Times (UK), Fiona Harvey (2010), does not seem to be bothered by unanticipated and/or troubling occurrences, and apparently believes that not only will fossil fuel power stations be banished from the face of the earth, but nuclear facilities will also be eventually liquidated.

As I have attempted to explain to Ms Harvey and her colleagues for many years, in a dozen or so of my articles, the optimal power generation strategy features a host of renewables and alternatives – and not just those mentioned in the Roadmap – but also a moderate increase in nuclear energy, and in particular – though not exclusively – energy from the next generation of nuclear equipment (Gen 4) when it becomes available in a decade or so.

According to Ms Harvey, Mr Matthew Phillips of the ECF said: “When the Roadmap 2050 project began it was assumed that high-renewable energy scenarios would be too unstable to provide sufficient reliability, that high-renewable scenarios would be uneconomic and more costly, and that technology breakthroughs would be required to move Europe to a zero-carbon power sector. Roadmap 2030 has found all of these assertions to be untrue.”

Well, Matt, with all due respect, as well as a profound understanding on my part that you could hardly do less than to praise Roadmap 2050 to the high heavens, I would like to emphasize that regardless of whether you and yours believe those initial assumptions you quoted, or not, they are not only true, but much truer than you, your friends and neighbours, and the ladies and gentlemen at the Roadmap launching site could possibly realize. Furthermore, the day after the Brussels extravaganza, I attended a seminar on coal in Stockholm, where among other things, during a lull in the proceedings, one of the speakers repeated to me some of the bunkum from the Brussels gig. In addition to waffle about Carbon Capture and Storage (CCS), he mentioned the wind farms that could be placed in the North Sea, and solar farms constructed in e.g. Spain, with all of these connected by a super-grid, and as a result providing the kind of reliable power that conventionally is not expected from items like isolated wind and solar, where capacity factors could be extremely low.

I of course had no choice but to inform that gentleman, and some others, that Roadmap 2050 was one of the most grotesque misconceptions ever presented audiences of sober engineers, researchers and executives. What I did not inform him and the other speakers was that I understood why Roadmap creators and disciples supported such obvious nonsense, foremost among which was the fact that it would provide many jet setters with an abundance of interesting – though socially unproductive – work that might last until they began drawing survivors’ benefits.

The Roadmap was also taken up by James Kantner of the New York Times (2010) in a short but informative article. That article deserves considerable attention, because according to Mr Kantner the cost of constructing the supergrid and providing facilities for reducing emissions by 80 percent was about 9.5 trillion dollars. Quite naturally, this is an informal estimate, and perhaps an exaggeration, but even so I suspect that in a seminar room or conference, it should be possible to classify an estimated cost of this amount as something so preposterous that it should never, under any circumstances, be considered. Here I want to mention that the Roadmap is very unlikely to be supported by engineers and economists who have nothing to gain financially and/or career-wise, and this is particularly true in France, where cost-benefit calculations are more or less routine. Of course in Sweden, engineers will show this bizarre ‘Roadmap’ deception an exaggerated amount of respect, because it would be a social and perhaps also an economic mistake to compromise their green credentials. Another organization that has indicated support for the Roadmap is the Stockholm Environmental Institute, which is a research establishment with a marked resemblance to what George Orwell called “a system of indoor welfare”.

I can terminate this short contribution by noting several of the peculiarities associated with the Roadmap, both directly and indirectly. The one of particular interest to me has to do with hearing that the Roadmap was derived from some reports of the well known consultancy McKinsey. Unless I am mistaken, that organization submitted a strange estimate for something to a firm in Chicago for whom I worked as a kind of applied mathematician. Similarly, their approach to the particular issues associated with the Roadmap display some equally strange analytical techniques developed with the Swedish utility Vattenfall, which is one of the largest electricity generators in Europe, and also owns some coal mines. According to one of the speakers at the coal seminar that was mentioned above, Vattenfall is genuinely interested in increasing the amount of electricity supplied to the growing world population, while decreasing the amount of carbon dioxide (CO2) accompanying this pursuit. In other words, they profess the kind of good Samaritan approach to their activities that was once practiced by Al Capone during his career as a very successful bootlegger and gang overlord in the ‘windy city’.

As far as I am concerned, their principal interest is in making money, which includes confusing the general public in Sweden and elsewhere about the ability to reduce CO2 emissions with ‘Carbon Capture and Storage’ techniques – which the brilliant MIT engineer Jeffrey Michel, who lives in Germany, calls a ‘thermodynamic travesty’. They also accept the utility of cap-and-trade for reducing CO2 emissions. I regard cap-and-trade as a scam, and I think it necessary that everyone who reads this short paper should know that it was rejected by the economists who first proposed it, Professors Thomas Crocker and the late John Dales, and also the leading climate scientist and believer in (anthropogenic) global warming, Dr James Hansen.

When Roadmap 2050 was introduced in Brussels, in the background was Shirley Bassey’s melodic rendition of ‘History Repeating’. Considering the high costs and low benefits that it entails, having Ms Bassey’s bellow her famous ‘Goldfinger’ would have been more appropriate.

REFERENCES

Banks, Ferdinand E. and Lim Tai Wei (2010), Energy, Environment and Economic Theory. World Scientific; London, New York and Singapore (Forthcoming)

Belin, Hughes (2010). 'A heavy burden on EU policymakers'. European Economic Review.

Harvey, Fiona (2010). 'No tariff rises seen in switch to greener electricity'. Financial Times (12 April)

Kantner, James (2010). 'Europe urged to share power across continent'. New York Times (12 April)



Professor Ferdinand E. Banks
April 21st, 2010
ferdinand.banks@telia.com




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