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Thursday, February 09, 2012

Energy Production's Direct Correlation With National Wealth part II

    Yesterday, in Part I of this, I discussed a particular paper showing the very close correlation between growth inn energy use, particularly electrical, and in GDP in America.

    However science requires results to be repeatable, particularly difficult with economics. But here are 5 separate examples:

1 - The original - that from 1900 to 1975 American energy use and GDP rose in almost precise lockstep.

2 - The original variant - that after 1975 GDP rose faster than energy use, at a time when energy production was being artificially restrained by the authority of an increasingly anti-technology government. I have previously described how, had political authority not been restraining the building of nuclear power plants and the previous trend continued we would have roughly 2.4 times more electrical capacity than we do. Note that though American growth was faster post 1975 than electricity production it was slower than it had been in the 1950s and 1960s.

3 - China's growth has been almost exactly 10% on average since 1980. As the graph under shows electricity production went up from 240 TWH to 2400 TWH between 1980 and 2005 - a rate of 9.64% annually. That correlation over that period of time is remarkable by any standards. China during this period has become a distinctly free market economy, unforced or restrained by overgovernment.
File:Electricity production in China.PNG

4 - From 1927 - 37 the Soviet electricity supply grew at an eye watering rate of 23% annually. The economy grew at a rate of around 10% annually, a level at that time almost unheard of in the world. It may be that other energy sources grew less fast but I suspect that the main reasons the economy did not reach 23% annually are the inherent inefficiencies of a command economy, even a newly formed command economy where the bureaucracy is not yet deeply entrenched, and that 23% was an even more astonishingly high target then, when basic technology was not growing as fast as it is today. This is therefore an example of government artificially pushing up the natural market rate of power production (at a horrifying cost in famine) and, again, the GDP growth rate following the power supply rate but not matching 100%.

5 - Tim Worstal not only making a case that electricity use worldwide, as shown by electric light emitted, very closely correlates with GDP but says that it does so better than official, GDP figures do. Not really possible to get a much better correlation than that

   That evidence being accepted,  the conclusion seems inevitable

   That in a free market there is an almost exact correlation between energy use and in particular electricity use (it being the most flexible and high entropy supply of energy yet developed and thus the most useful).

   That government can greatly promote or restrain GDP by promoting or restraining the power supply. This does not exercise a complete one to one correlation, but it does work far more effectively, in both directions, than than the fiscal or even entrepreneurial encouragements or restraints it controls. This is exactly what we would expect if power production is not the sole vehicle of growth but is the predominant one, probably producing around half the total cause of growth. Thus the Soviet economy grew at just under half the rate of electricity growth (probably over half the rate of total power growth)  while, until the last few years the British economy has managed some growth, in good years 2.5% or half the world average, while electricity supply was actually being made to slightly fall.

    And so to part III.

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One day you will get the hearing you deserve ,Neil . You will be vindicated but it probably will not get things sorted out , too many powerful vested interests.
A thought occured to me today , if we build a tunnel between East Lothian and Fife , would a large pat of the dig not be high grade coal? Might even be self financing!

Keep up the good work.
Thanks for the kind words.

With open cast mining coal is relatively cheap so I doubt it would be a major factor. Also depends if the optimum tunnel depth is at a level where coal is.

However perhaps it might then become cost effective to have a side exit from the tunnel and hollow out a space which could then be used like the underground city of Amsterdam I previously wrote on. Wouldn't consider this likely but an option worth keeping open.

When we still mined coal there was indeed a a spur linking the mines on both sides of the Forth - which did not require a £600m government investment.
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