Saturday, February 11, 2012
The early USSR is an example of doing it no holds barred. Stalin simply confiscated the peasants grain and sold it abroad to buy machine tools, generators etc etc. Now in its way that was successful, in that they did build a growing economy, but it also meant several million peasants starving to death. I think a market orientated approach can achieve the growth without the deaths. I think a market orientated approach would have worked better in the USSR at the time but that wasn't an option because the USSR, being poverty struck and coming out of a civil war, had no spare money to invest; because of western anti-communism wasn't able to borrow internationally; because of Soviet anti-capitalism, wasn't willing to allow investment either by foreigners or natives; and because they had grabbed the assets of both foreigners and natives nobody was going to be silly enough to invest there no matter how good the opportunities. The state having destroyed all other options had to do it itself.
Fortunately none of this applies to us today (well ok there are some politicians ideologically opposed to sanity). There is no shortage of money in the world economy available for commercial investments. Companies are bulging with money. It is simply a shortage of such investment opportunities, at least in the slow growing Luddite economies of the EU and USA. So my proposals involve working with market incentives rather than against them.
Even better, from our point of view, is the fact that there is a method of greatly reducing the cost of electricity production and producing it in far greater quantity without any technological breakthrough. That method is reducing the regulatory burden on nuclear power, which makes up most of its cost, and allowing/encouraging the mass production of reactors. It seems certain that wholesale electricity prices in Britain could be reduced by 93% by doing this. Since ours is some of the most expensive electricity in the world the effect elsewhere might be as low as only cutting 75%.
So what should we do to bring this about.
1 - Set a target. I have previously given the calculations that showed a maximum theoretical sustainable growth rate of 23.8%. To achieve that would obviously require a minimum of that rate of increase in energy usage. In practice one would want more than that and suggest we should be prepared to support a growth rate 1 1/2 times that ie 35%.
We use an average of 40GW per hour Call it 50 to cover normal variation.
So we should be wanting to produce 67.5 (increase of 17.5%) after 1 year.; 90 ((inc 22.5) after 2; 120 (30 inc) in the 3rd; 160GW (inc 40) in the 4th; 215 (55 up) in the 5th; 290GW (75 up) in the 6th; and 390GW (100 up) in the 7th.
In fact, since it takes some time to build reactors I assume we would not get those increases in the first 3 years. However if a mass production reactor factory is involved able to turn out 100 Gigawatt reactors a year, at a flat rate, the production in years 3,4 & 5 should sufficiently exceed the target to catch up.
However simply ending the subsidy of windmills would reduce prices immediately and investors, knowing that the increased supply/reduced prices were online, would start investing and growing the economy immediately.
Up till now the normal assumption has been that it takes 3 years to build a new reactor so with building a factory mass producing them one would expect somewhat longer. However there are 2 alternatives. Firstly an X_prize for early completion and secondly the new Westinghouse SMR which is 1/4 GW but designed for mass production & easy delivery within 18 months - it is 1/4 the size but takes up only just over 1/4 the space of a traditional reactor, 1/4 the cost and presumably could be mass produced 4 times as fast.
With mass produced reactors costing £800 million per GW retail I would expect such a factory, producing 100 GW a year , would cost not more than £200 billion - I'm assuming Westinghouse are expecting that of the £80 billion they will make a year in turnover, 1/2 will be marginal profit giving them a 20% return on capital - highly profitable but by no means outstanding for a new product. A massive investment indeed but at 4% of GDP, not much to get an economy growing at 24%. In fact it would be in national surplus in a year if we only got it growing at 4.1%.
It is also close to what the government insist they want to spend on windmills, for no obvious beneficial effect, so clearly they think we can afford.
That is assuming government has decided they want the ownership and long term profits of the business If government decided it was happy to keep only about 20|% of ownership it could arrange this simply by providing Westinghouse with land, instant planning permission, the end of all unnecessary regulations, ministerial support in negotiating international loans, a guarantee to support purchasers in adding the power to the grid and a holiday on VAT & other taxes for the first 3 years. This would obviously cost virtually nothing since not collecting taxes on an industry which is currently not intended to be allowed to exist, is not a cost.
I suspect the optimum would be somewhere between government paying the lot and owning it all and government paying nothing and owning 20%.
A few other ideas which are less hands on:
- Planning permission to be decided for any power project in a matter of days and to go through unless they are very strong reasons against.
- Tax holidays or rebates for the entire industry so long as it isn't growing faster than the target rate.
- A state guarantee a minimum purchase price for up to the target amount of electricity which they then resell at whatever price the market will bear. This could be expensive if demand is seriously overestimated but it does greatly reduce the business risks of investing in such expansion. (this idea is derived from a similar proposal for orbital launch cargoes and was used by me in a proposal to encourage the modular housebuilding industry.
- Strong programme of cutting unnecessary nuclear regulations.
- A constitutional right to demand the suspension of any regulation that imposes a heavier cost/safety ratio on one industry than comparable regulations in another. Again something previously advocated. With 5 people having died in Britain from windmills in the last 5 years and only 2, because of reactors, anywhere in the world, over the last 20, while nuclear produces orders of magnitude more power, it cannot honestly be argued that we have a level regulatory field.
- Government providing loans at the normal government borrowing rate.
- An X-Prize for the completion of the first new reactor. Smaller ones for 2nd & so on.
- Improving the national grid so that it can handle as much new power as wanted.
- X-Prize for the first commercial thorium reactor. This is based on what the Saltire prize is supposed to be doing for sea-turbines.
- Building links for an International Grid based on high voltage DC current (HVDC). Once such links are in place we have an export market ready to hand. One of the few things government appears to be able to do cost effectively is to improve transport infrastructure and since facilitating transport of electricity, while technically entirely different, follows the same economic arguments as those for facilitating the transport of lorries, this is something government can properly do.
- Algal oil. The potential for producing oil grown from algae is virtually unlimited if done from mid ocean plants using nutrient heavy water from the ocean depths. Substantial prizes for early successes in developing this should work.
- The Saltire prize. I don't think it will work because i don't think ocean energy i has the necessary energy density to ever be competitive. But if the prize is properly run it will do no harm and might even prove me wrong. If it doesn't no prize is awarded. This is only part of the "renewable" industry that might prove worthwhile
- X-Prize for improved efficiency of solar power. Solar power units are dropping fast in price along with other electronic goods. At some stage, possibly quite soon, they may become cheaper than the electricity we now use. Of course our current prices are far above what they could be.
- X-Prizes for developments in the field of "conventional" fusion
- X-prizes for development in the field of low energy nuclear reactions (LENR) the more respectable & more accurate name for cold fusion.
- X-prizes for development of solar power satellites.
- Funding nuclear pulse launches - anything that can put 10,000 tons in orbit cheaply in one go can quickly fill the sky with solar power satellites .
When energy is available in those quantities it will no longer be a limiting factor in growth. Perhaps something else will be. Perhaps wealth will cease to be an issue when we all have everything wealth can supply.
And if demonstrating that, here and in part 1 and part 2 doesn't get me a Nobel in Economics nothing will ;-)
I've heard of a different position, but i don't know what exactly it covers.
The economist is named Gaël Giraud of CNRS (French state research), and his main position is that unlike most economist he dont expect the Growth to be linked by 10% to Energy availability, but to 60%.
since i don't understand exactly the 10% (is it basically the share of energy in the economy, 10%? GG talk of elasticity of GdP to energy)...
His conclusion is that making huge energy volume available at low cost will have much more impact than expected.
One can see that with Shale gase boom, with 18th century coal/steam.
here is a google translation
"Chief Economist at the French Development Agency and Director of the Chair "Energy and prosperity," you are known for your critical models and assumptions used by the "orthodox" economists, particularly their inadequate consideration of energy issues . Can you tell us on what basis the strong link that you establish between energy consumption and growth?
How do you measure the dependence vis-à-vis the GDP energy?
GG: To identify and evaluate this dependence, economists speak rather of elasticity of GDP relative to energy: most believe the next 8-10%. Yet the analysis of long time series of primary energy consumption over thirty countries shows that in fact it is permanently and structurally close to 60-70%. To be more specific, when the primary energy consumption increases by 10%, GDP tends to grow 6-7% on average, with a possible delay of up to eighteen months. Of course, this finding must take into account that many other variables stir together the energy consumption, which also have an influence on GDP. We must therefore interpret this with caution. Moreover, the ratio of 60% varies between countries and over time: it is lower today in Europe and the United States, and it is weaker today than before the two oil shocks of the 1970s . But one thing is certain: our economies are much more dependent on energy than "orthodox" economists want to admit.
How economists can they neglect the impact of energy?
GG: Not all economists, especially those from the mainstream neoclassical! For physicists, it is clear that nothing on Earth happens without intervention, to a place or another, energy. Yet this triviality is not accepted by all neoclassical economists. Most of them continued use of small highly questionable reasoning to justify their lack of interest and energy of all natural resources. These "small arguments" are precisely those that deconstructs Steve Keen in his book Economic Deception 1. The non-energy commodities are also a huge issue, first and foremost minerals, which largely confirms the research that I I started with Olivier Vidal, of the Institute of Earth Sciences 2 in Grenoble."
Note that we probably don't speak of the same "energy".
My vision is that if there is no technology change, the multiplicator is uninteresting.
what have huge impact, is a technology revolution, which allow new applications.
maybe also the notion of growth as measured today does not catch the improvement enough.
By the way I expect soon a big experiment.
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