Low Carbon Vanity
by Andrew McKillop
Strategic Analyst and Advisor
March 25, 2010
MEGA VANITY PROJECTS
Speaking on March 11, 2010, Chinese vice minister for Industry and IT, Miao Wei, described massive wind farms in China as essentially "vanity projects". Reasons he gave were that wind electricity costs more than coal or nuclear, windfarms have large land needs, the better locations have already been utilised, and siting wind mega projects on cheap land in China's dusty deserts would likely accelerate wear and tear of the mills, cutting their useful lifetimes to 20 years or less.
On a much shorter timeframe, spanning the 6 months from September 2009 to March 2010, European political leadership support to carbon taxes grew to a peak then collapsed. On March 23 the French PM Fillon announced there would be no carbon tax in France, the exact opposite of what he announced on Sept 10, 2009, despite President Sarkozy many times saying this tax was the way "to save the planet". The reason is simple, climate change hysteria received its political kiss of death at the Copenhagen climate summit farce of Dec 2009.
Backtracking on overhasty and overblown announcements that the "fight" against climate change and for low carbon energy was a struggle to save civilization, political leaderships in the OECD countries are starting to understand the credibility loss they have suffered on this issue. The timing is bad, since it comes hard on the heels of their bungled, expedient and massively expensive bailouts of failed finance sector gamblers, and low carbon vanity projects are doing nothing to trim rising oil prices. Losing the climate issue after losing the finance issue makes it clear to everyone (outside government), and increasingly the friendliest of government-friendly media, that the future for prestigious cost-doesnt-count vanity projects is uncertain if not canceled.
LOW CARBON HIGH COST
The heroic pressure to force feed growth of green or low carbon energy, like all vanity projects, needed some powerful basic rationale, and this attempt to sell high price energy was simply presented as needed to save the world as we know it. The bottom line of how much these ever bigger vanity projects cost, and how sustainable they are, always came a lot further down the list of questions polite people dont ask and politicians coyly sidestep.
To be sure, making comparisons of low carbon non-fossil energy, and today's real world energy system about 85% fossil based, is difficult but outline figures can be given. Some are even sketched out with seeming precision by energy agencies like the IEA and EIA, by OECD studies, by national economic agencies, from the UN's IPCC itself fast losing credibility through its bungled attempts to exaggerate global warming, and from reports to the Davos Forum, think tanks, university research centers and other sources, including corporate study groups across the world.
Most of these studies take a hypothetical low growth scenario for world total energy demand to around 2030 or 2040, and forecast what part of that future demand could or might be met by low carbon "cleaned up" fossil energy, energy saving, and non-fossil alternatives. Targets for "penetration" of alternate energy are often in the range 20% to 33% of total needed by about 2035. Costs are set by using usually low forecasts for the capital cost per unit energy. Energy technologies covered sometimes include nuclear power, and sometimes do not. Energy saving forecasts vary widely, as do forecasts for the rate of cutting the energy intensity of economic output, leading to an extreme high range of figures, scenarios and guesstimates.
However, from all these data sources, we can give a range of around US$ 15 to 30 trillion in current dollars being needed, to 2030 or 2040. Whenever the non-fossil energy sources take a high role, up to 25% or more in some scenarios (compared with about 1.5% today from non-hydro renewables), the costs spiral even further. These cost figures, we repeat, would concern a maximum of around 25% of world future commercial energy supply being cleaned up and/or "defossilized" or in carbon correct newspeak "decarbonized" in the next 25 to 30 years.
This concerns perhaps 25% of future energy supplies - capital raising and investing for the other 75% also has to be estimated and costed. This could or should, but rarely is compared with current majority-fossil energy capital expenditure, heavily trimmed by the recession from 2007 highs, but standing at about US $650 billion in 2009 for world total energy spending, from oil and gas through coal and uranium to electric power. IEA forecasts are that world oil and gas capital expenditure, alone, could hit US$ 1 trillion a year by 2016, mainly due to fighting depletion and paying for high cost LNG infrastructures.
One thing is sure, the chance of a quantum leap in energy sector spending was already low before the Copenhagen climate summit wipe-out. Today it is even less likely. This returns us to the present, and cumulative growth of "vanity projects" in low carbon energy through the recent past of around 2003-2009. What we can be sure about is that "present generation" green energy, with a price tag of about US$75 billion a year in 2009, depending on definitions of what this covers, will certainly deliver high priced energy and electricity for users, sharply contrasting with the fact-free euphoria of grandiose corporate low carbon mega projects being flashed in the media.
SUSTAINABLE IS VARIABLE
Just as surely, the unlimited potential for corporate appetite ensures that predictable calls will grow for bigger government hand-outs, cheap loans and high prices for sustainable power, called "feed in tariffs", to deliver the low carbon future. Trifling details like the longevity or sustainability of the sometimes huge vanity projects is usually unknown, and usually exaggerated.
As in the Chinese example above, and across most technologies and systems in soft energy, the magic word "sustainable" has flexible or unknown meanings. In some cases, such as batteries for electric cars, the life cycle may be as low as 3 years, depending more on annual mileage and driving style, than battery tech. In other cases the new and "sustainable" low carbon alternatives may only have a 10-to-20 year life expectation. As the scale factor is driven up by corporate pressure for big projects, and media demand for sensational artist impressions, newly emerging concepts like the Smart Grid can extend to a patchwork of massively variable and complex, interdependent technologies and infrastructures, with multiple weak link components having short, or unknown and exaggerated estimated lifetimes.
Building the Smart Grid, depending on what the term means, could itself take 20 or 30 years. Its lifetime could however also be the same, depending on the components, utilisation, and many other factors. Like never-completed heroic technology projects, comparable with the 'Titanic' ship or 'Concord' airplane, to be theoretically followed by vast fleets of the same items, in-built obsolescence and imaginary or hoped-for performance of the new and sexy gimmick were underestimated, overestimated, unknown or ignored. This did not save the day.
The drive to imagine a sustainable energy future itself depends on imagining, or hoping the global growth economy is sustainable. This is very far from sure. From a much lower peak than today for global energy demand in 1929, some countries experienced over 10 straight years of falling energy needs in a recession-type sustainable economy. Economic recovery from the 2008-2009 recession is simple to identify: shrinking rates of energy demand contraction, then rising rates of energy consumption. These are, to be sure tracked and anticipated by oil and coal traders, if not yet by uranium and natural gas traders. Some OECD countries through 2008-2009 have recorded falls in oil demand close to 7.5% or above, electricity demand in some has shown falls far above 10%, coal demand also contracted far and fast, showing that depending on the type and severity of recession, commercial energy demand can fall much more than GDP output. The energy economy is itself variable. Growing demand is only sure if the growth economy survives.
This adds another challenge to the drive for low carbon energy: Are we sure it will be needed?
FEED IN, FUEL UP AND MOVE ON
The bottom line for green business promoters is a lot simpler. As in any boom-bust the urge is to profit from investor naivety and rack up earnings right now, in a new and fragile sector where the previous and apparent cast-iron political and public opinion support is showing dangerous signs of reality fatigue. The race to always beat the competitors and grab the biggest slice of the action is now faced with a "best by" date, as political, corporate and technical credibility slumps for saving the world with green energy. Developing green energy as an urgent, panic-driven final solution in record time has to have some powerful rationale behind it, when the saturation media support and uncritical coverage by government-friendly journalists starts to ebb.
Through 2009, until the Copenhagen farce, the no-contest leader rationale was runaway and catastrophic climate change, leaving others, like peak oil, far behind and below. Apart from higher priced supplies of oil, the "Jurassic fuel" for the world's 950-million car fleet, about 98% oil fuelled, its agriculture and its shipping, its plastics and pesticides, the favoured rationale for an emergency program to develop green energy was climate change fear.
This policy lever for a rush of borrowed public funds being thrown by governments to the hungry wolves of the green energy finance community is now weakened and wounded, after its serious and perhaps mortal slap in the face, at the failed climate summit in Copenhagen. Since that time, even the friendliest of government-friendly media have piped down on catastrophic warming stories. Models of Arctic pack ice melting now have the forlorn look of Iraq war invasion models, and polar bear pictures have beaten a retreat from page one.
Government funding to "a sustainable future" is tending to fall back, as signalled by the French abandon of carbon tax, and steadily falling support from other governments to low carbon vanity projects. This can be explained as due to the crisis and post-crisis slow economic growth, but is also due to collapsing credibility for global warming hysteria and growing uncertainty on the longevity and performance of soft energy vanity projects. Slowly but surely, the green wolves of corporate low carbon are beating a retreat in their rhetoric that, so very recently, had government deciders quickly inundating them with cash, in a balmy context of massive media support to flash their overblown vanity projects to the uncritical public.
GREEN JOBS?
As recession began to bite in 2008-2009, and government bailouts of the reckless gambler community engaged in "financial engineering" mounted into the hundreds of billions, creating jobs to soak up a little of the collateral damage from the finance meltdown began to appeal. Claims that green energy revolution will create massive numbers of sustainable jobs in new feel-good professions and occupations were tacked on to the "fight" against climate change by urgent development of green energy, at the time of the 2009 G20 London Summit.
To be sure, the promised numbers of jobs created "in the near term future" were heroic, but like any paper promise from politicians hurrying to hand over public funds to their private corporate friends, with high-spin stories of "thousands of new jobs", the actual results were, and are low and unsubstantial.
Spain, the world leader in windpower per capita, and also far up the scale in solar PV power stations per capita shows this non-performance very well. Its current 2010 national unemployment rate is close to 20%, one of the highest among EU27 countries wallowing in their collective recession-trough, and assailed by vast new public debts and a shrinking Euro. Spain's unemployment climbed very fast from 2008, in lockstep with its continuing national lunge into high cost green energy. The non-relation of growing green energy, and employment, is rock solid. We can therefore say that a political decision to rapidly grow the green energy sector backed by massive government financial support, does nothing to cut fast growing job losses. In fact, the two go together like hand and glove, because green jobs are often high-tech and capital intensive. That is, expensive.
Creating jobs in a high-tech solar cell or electric car factory, with often high environment impact from its toxic wastes, is among the highest cost job creation vanity project that exists, meaning that subsidies are all. When the subsidies stop, the jobs disappear. If the subsidies are not forthcoming at the corporate negotiation and media promotion stage, the jobs never materialize. This real world saga of green jobs has already been repeated hundreds of times, both in OECD countries and Emerging Economies.
FIGHTING DESPOTS WITH GREEN ENERGY: ENERGY SECURITY
Right behind the strident claims of Apocalypse Now that star speakers on the climate change talk circuit, headed by Al Gore, like to thunder at the microphone, comes the notion of energy security. This is national security flowing from the biofuel barrel and spinning windmill rotor. Fighting the political kiss of death they received at the Copenhagen farce of Dec 2009, global warming hysterics now add energy security as yet another key benefit from their vanity projects.
Along with low carbon energy, we would get a cut in oil import bills, saving us from the cruel and despotic oil exporter states of the OPEC group, from friendly democratic Russia, and from environment conscious Canada. Cheap, or at least secure and home-brewed green energy would generate balanced trade with the rest of the world, improve national finances in other ways, and perhaps also strengthen the national currency. Along with the green jobs, and prevention of Arctic ice melt, the consumer public would be yet more enthralled by the energy security they can have for a few trillion dollars, a year.
While the cold winds of "Climategate" have chilled the lyrical outpourings from also-rans in the climate change circus, the high priests of climate hype, Al Gore and Rajendra Pachauri have kept up their Old Time Religion, as recently as February 2010. Lower echelon members of the caste like UNFCC director Yvo de Boer was cast out to expiate the Copenhagen horror. Throwing all caution to the winds, the high priests of climate hype celebrate what is likely their last moment of glory, or public and media tolerance, with ever bigger numbers for the spending needed to develop green energy in time to beat OPEC and NOPEC, and to save polar bears. The rationale now shifts to oil import dependence and costs.
Assuming the OECD group has a net deficit on trade in crude oil, refined products, and petrochemicals of around US$ 350 to 450 billion a year, mainly depending on prices, this figure can be creatively enriched, for example by only taking crude oil import costs, before re-exports and refined product exports. In the US case, as Al Gore likes to quote, this gross amount of oil energy import costs can total "hundreds of billions of dollars a year", at least 2 of them, in its most-recent record year (2007) for gross deficits on it oil trade.
VANITY CHARTS AND GRAPHS
Based on this, green energy spending and creative ideas like carbon capture at every coal-fired power station, and related sustainable economy investment spending of dazzling amounts can be magicked from thin air.
The "few trillions" a year becomes the operative and basic capital spending guesstimate.
No imaginary and exaggerated claim from an anonymous blog writer can surpass the raft of official distortion, exaggeration and hysteria contained in supposedly serious government publications on the subject of "climate change strategy" since about 2005. The genre is so rich in hype and fantasy that in a few decades, perhaps, official climate hysteria of the first decade of the 21st Century will be curiosity kitsch, with lower quality volume material good for making lampshades, like Imperial Russian bonds, to cover the discerning collector's antique terbium-based, high efficiency fluorescent light bulb. These vanity tech bulbs were of course quickly abandoned for regular lighting because terbium supplies were short, and dominated by unreasoning and Google-unfriendly China, which needed the terbium and other rare earths it dominated for its own short-lived attempt at transition to the green energy vanity economy.
The Stern report is still a leader in quickly generating mind-boggling forecasts and estimates of how much needs to be spent to "save the planet". It said for example that world GDP in current dollars to 2099 would rise to US$ 250 trillion a year or so (about 4 times present), but climate change could bite out US$50 trillion a year from this magnificent amount. This being the case, the report went on, spending of let us say US$2 trillion a year to fight this menace would be a trifle, and we can at least start with a modest US$ 500 billion a year. Such is econometrics.
CREAM ON THE PIE: CARBON MONEY
Like Imperial Russian bonds, green energy financing lends itself to other heroic quests, and notably what to do about the fantastic new debts whacked up by most OECD countries in 2008- 2009 in their fight to bail out finance sector gambling losses and reward corporate incompetence. So easily in fact, that Carbon Currency seemed an almost sure-fire solution to all debt and finance problems, with a nicely technocratic image for the computer conscious. Dumping old style debts, along with old style moneys seriously appeals to OECD leaders although, at the microphone, this is explained as urgently needed action to save polar bears and prevent Biblical Flood, after 2075.
Carbon Money does not appeal to the few remaining creditor nations of the planet. The concept was openly rejected by the Chinese and Indians, Saudis and Russians at the Copenhagen farce. Climate summit failure was likely the most serious humiliation for the furthest-out climate hysteria politicians of the OECD group, headed by Obama, Merkel, Sarkozy and Brown, simply because their eccentric and unworkable "CO2 Bancor" proposal to create a new world money, and forget about their fantastic new debts, also hit the dust.
Carbon Money as a gadget for saving public finances, if not the climate, was almost surely the real reason so much official government hysteria, in the G7 countries, was pumped through the compliant media before December 2009. This fragile concept has now been passed to the IMF, which now has to run with the carbon money ball-and-chain, and may soon quietly abandon it.
ENERGY TRANSITION AND ECONOMIC ROUT
Falling credibility of climate change hysteria from extremists like Al Gore and Rajendra Pachauri, and lower-rank members of the climate change circus, such as "Gaia philosophy" writer James Lovelock, James Hansen, and Club of Rome intellectuals will run alongside decreasing "Stimulus Spending", that is cheap public loans and free bailouts for the financial gambling community. The risk is clear: the climate change circus has now talked itself off stage, also cutting off a useful new source of public support to private corporate incompetence.
Before the Copenhagen rout, announced goals of energy transition in the OECD countries had attained extreme and impossible highs, for example 80% reductions in CO2 emissions and implied cuts of 80% in the dependence on fossil energy by 2040, as announced with a winning smile by Obama, and the leaders of Germany, France and UK before the climate summit. Anything above 25% of total commercial energy coming from non-hydro renewable energy in 2035 can be costed at a need for world capex in alternate energy being raised to US$1 trillion a year from 2010 and maintained at that rate for 25 years. World fossil energy capex can easily attain more than US$ 1.25 trillion a year by 2016. Cutting CO2 emissions by 80% with growing energy consumption is adding an impossible condition to already-challenging energy sector spending goals.
To be sure, following the massive deficit-financed bailout of the finance sector, and massive aid to the car industry, to encourage consumers to buy new oil-fuelled cars, the hoped-for racking up of further hundreds of billions of public debt to fund low carbon vanity projects of corporate green gamblers can, or could seem feasible. The industrial and technology implications, and resource supply issues however spell out trouble in the real world, totally different from the multi-billion bailouts of failed financial operators. Building entirely new and complex energy infrastructures alongside the existing will need heavy and constant industrial effort, starting now, and continuing far past the first 10 or 15 years, to 25 years or more. In fact a nearly permanent global programme for energy transition would be needed.
There is no trace of this, today. The simple question of what energy transition really means - including using less - is always eluded. The general public is screened from the basic bottom line that energy prices have to rise, will rise, and could rise very fast by future shock spiralling back from the fantasy future to the tormented present. When the price shock arrives, much higher energy prices will then work their own magic both on economic growth, on future energy demand, and the ROI of high cost and complex alternate energy vanity projects. At that time, green energy investing will be even more of a loser than it is today.
© 2010 Andrew McKillop
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