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Friday, June 22, 2012

Competitive advantage is about economics - not geography

  This article of mine, which takes the Reform Scotland thinktank to task over a report they made saying windmillery was practical and nuclear isn't. By signing up the politically acceptable it has got "within the small circle of Scotland's political "consensus"" but only at the cost  of joining that "consensus" rather than promoting reform.

   Please put your comments on there.

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A REPORT on Scotland’s energy options produced by Reform Scotland a few months back(1) was remarkably supportive of windmills and largely against nuclear. Having written here to exactly the opposite effect(2) I was intrigued by what facts they had spotted that I hadn't - especially since there is not a single engineer on the Reform Scotland panel.
The report’s authors are against nuclear "because, unlike other forms of energy production, Scotland does not have a competitive advantage in nuclear energy" which, I must admit, I hadn't considered. I had thought merely that the fact that nuclear is more reliable and much cheaper would be the primary considerations.
By this argument we should outlaw the motor car and replace it with carts drawn by highland cows, since we have a competitive advantage in the supply of them. To be fair there are probably a number of people in the "environmental" movement who would look on that with some favour.
There are countries where there is a competitive geographical advantage for one power industry. Hydro power in places like Canada, and Norway where water resources are abundant; geothermal in Iceland where magma is close to the surface; potentially someday solar power in the countries of the Sahara and Kalahari deserts. All of these depend, however, on the power being not only cheaper than in other countries but cheaper than traditional and available power sources.
For instance Botswana has the highest level of available sunlight for solar power in the world but it also has 212 billion tonnes of coal reserves and it is far, far cheaper to dig it up for coal-fired power stations than to convert sunlight into megawatts (and for it to be available in the dark when people need it).
It is surprising that it is not obvious to Reform Scotland that there is no advantage in having a competitive advantage in doing something not worth doing. It could also be pointed out that the high skill level of Scots engineering gives us a significant advantage over many other countries - certainly greater than that of Bulgaria and Slovenia who get over one third of their power through nuclear generation.
There is no serious question that nuclear normally comes out as the least expensive power source and less than none that wind is particularly expensive. Since most of the cost of nuclear is in meeting government regulations, despite it having a far better safety record than anything else for the power generated, I am of the opinion that nuclear's cost could be greatly reduced if there were the political will for it, but let’s not get ahead of ourselves.
What does this report say about nuclear costs? That is an interesting question because it has two answers. Its graph of cost estimates is not drawn from the widely respected Royal Academy of Engineering figures(3) but nonetheless shows nuclear's range of costs as lowest (page 38), half that of offshore wind. (The RAE figures are, of course, even less helpful to renewabilists.) Then, in a listing of the advantages and disadvantages of each (p42), the authors show nuclear as costing the same as on-shore wind and more than off-shore!
Incidentally, while admitting conventional coal power as being more expensive than nuclear (or wind) the report shows coal with carbon capture and storage as significantly cheaper? In fact, since CCS requires a lot of expensive extra equipment and work and significantly reduces thermal efficiency it is certain, if it is ever actually made to work, to cost around twice what current coal power costs.
There are many other dubious things in other less figure-related parts of the report, such as the statement that there is a “limited potential for the nuclear sector to contribute to economic development in Scotland” which can only be said by ignoring the fact that nuclear used to produce half of the power used in Scotland, while still exporting large amounts to England and Ireland and that the correlation between low cost energy and economic development is indisputable.
If half our electricity used to come from nuclear what juxtaposition of reality allows one to say that it is impossible to help achieve economic development while pretending that windmills, which have no such record, can?
And so on, but life is too short to keep dissecting forever.
The question then becomes, why?
Reform Scotland was set up in 2008 as the child of Reform, a London based free-market think tank and soon absorbed the Policy Institute, a small Scottish organisation which had produced a number of innovative reports that Holyrood's parliamentarians would have done well to read.
Yet looking at Reform Scotland's output it does seem increasingly timid about taking on the anti-free market "consensus" of Scottish politics. With Jim Mather (who I acknowledge is the SNP politician with the most understanding of the uses of economic freedom in that party) and Wendy Alexander (who for all I know may be the best Labour have) now on its board it may well now be within the small circle of Scotland's political "consensus".
Reform Scotland’s current leading role in setting up the "civic Scotland" discussion of a third referendum question (something the SNP desperately want but cannot call for) suggests it has genuinely arrived.
Surely, though, a think tank exists to think outside the box, not merely to ensure that only the politically correct gets into the box with it?



(1) "Powering Scotland" http://reformscotland.com/public/publications/Powering_Scotland_.pdf

(2) "Power economics keep pointing to nuclear solution" http://www.thinkscotland.org/change-scotland/articles.html?read_full=10872&article=www.thinkScotland.org among others

(3) RAE figures of power costs http://www.raeng.org.uk/news/publications/list/reports/Cost_of_Generating_Electricity.pdf

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