Thursday, December 10, 2009

We are not reindeer eating moss

And so we come to the end of another year past peak oil, and the wild predictions of chaos and war of the doomers have not yet come to pass. Things both good and bad happen slowly in the world, because humans are complicated beings. People are often upset and confused by this complexity, and so they have recourse to all sorts of crazy things, like graphs. For example, if you discuss resources or population, someone might post up this graph, and conclude,

"I'm betting that in the case of humanity we are probably headed towards a major crash."

The guy is far from unique. Sites such as life after the oil crash, dieoff, James Kunstler, and so on are legion. These are guys who provide us great entertainment by predicting doom and giving us a date for it, a date we can then watch pass with nothing world-shattering happening. For example, permanent blackouts in the US by 2007.

They get enthusiastic responses from their graphs and simple statements of doom. "This is a graph we should not forget," replies an editor of Olduvai Gorge. Basically, as soon as oil runs short everything turns to shit.

So is the reindeer graph one we should not forget? On the contrary, this is a graph that reinforces why we should beware graphs: they may tell the truth, but they do not tell the whole truth, and their truths are not always universal.

The graph of reindeer population is an example of one creature with no natural predators around, and one food source. And that creature was stupid, in that it was unable to find new food sources, and unable to control its reproduction or level of consumption. It's just an animal.

Had there been other things available for the reindeer to eat, it would have been a different graph. Had the animal been intelligent and been able to get to new resources or change its behaviour, it would have been a different graph.

Humans have multiple "foods" - actual food, water, electricity from various sources, fuel for transport, and so on. We can also change our behaviour.

All these things can act to mitigate any downslope, and make it less steep.

These stories of isolated islands of reindeer and their moss or Easter Islanders and their giant stone heads and forests are attractive to us, because they're so simple. But in the wider world things are more complicated. The greater complexity means things don't go as neatly as graphs tell us.

Since oil dropped down from $150 and the financial crisis hit, I've noticed a real despondency among TheOilDrum readers and many others on peak oil and similar sites. A disappointment that oil didn't keep going up and up and various systems collapse as long-predicted. The world isn't operating according to simple formulae. 

I understand this disappointment, because I made dramatic predictions, too, and as I describe here, things didn't turn out so dramatic and simple after all.

This is a problem that doomers, from Kunstler way back to Christian evangelist groups in the 1800s, have always faced: if you give a date for doom, what do you do when the date passes and nothing happens? If you're Kunstler or the Christians you just ignore it and carry on with new doom dates. More intelligent and mature people have to adjust their thinking.

The world's more complicated than a bunch of deer munching on moss.

The mature thing to do is to accept that a simple up-and-down graph doesn't tell us much about the world. It tells us something, but not everything.

So if not doom, then what can we expect from peak oil? I've previously written that we can expect a reduction in the range of our lives, with our largest cities being unviable, and that the Third World will never get their place on the sunny beach of living a wasteful lifestyle.

Thus, a lot of drama and suffering and change, but not much doom. We won't see tens or hundreds of millions of people die in months, or large nations fall, nor is it time to retreat to our bunkers in the woods with our assault rifles and spam. There are simple steps you and I can take to reduce how much of the world's resources we pollute and steal, steps which mean that if a crisis does come it won't be so painful for us, and steps which will in any case improve our individual quality of life.  

We are not reindeer eating moss.

Saturday, November 28, 2009

The problem of money

Given the global financial crisis, which is now looking worse due to Dubai, I think we can all agree that money is a problem. Specifically, is the particular way we choose to create money the best one? Since it's led to financial collapse, probably not. Internationally, money is a difficult and complex issue which I'll not get into here. Locally, things are a bit simpler. Many of the following ideas come from Geoff Davies' Economia, which I recommend to all interested readers. 

I think what would work well at a local level would be a currency which,

  • is a medium of exchange, not a store of value
  • is backed by a basket of commodities which decline in value over time

  • so that the currency itself declines in value over time

  • and which cannot be lent at interest

I'll explain below.

Money today has two functions, as a medium of exchange and as a store of value.

A medium of exchange is plainly necessary, so that we don't have to note down which part of a living cow we'll give when we slaughter it in June for this hoe we get in January. I can give my mate Joe an IOU, "Jim owes Bob one-twentieth the cow Betsy". If I only accept IOU from Bob, it's just an IOU. If Bob can give the IOU to someone else in payment of his own debts and I'll give that one-twentieth of a cow to that person instead, that IOU has functioned as a medium of exchange. Money is simply an IOU anyone will accept.

Getting people to accept your money is the most difficult part, as creators of local currencies have found. That's why people also try to make their medium of exchange a store of value. If Jim gives Bob an IOU, Mary may or may not accept it for Bob's debts; if Jim gives Bob a sack of wheat, well wheat has intrinsic value, so it can be a store of value as well as a medium of exchange.

This is why so many people instinctively look back at gold and silver with nostalgia, thinking that if the stuff has intrinsic value, people will accept it. Unfortunately gold and silver don't have intrinsic value, they're usually just pretty, and sometimes but not always useful. And we don't really have enough of them anyway. We only have about 160,000 tonnes of gold in the world, total - 0.024kg or less than one ounce of gold for each of the 6.7 billion people on Earth. Or if we consider silver, about 43 billion ounces have been produced ever, about 6 ounces each. The medieval silver penny had a bit over a gram of silver, so that 6 ounces would allow some 170 pennies. One gold ounce and 170 silver pennies in coin each year - not really enough for all the things we'd like to buy and sell, I'd say.  

Still, it's not clear that a paper or electronic store of value is necessary, as opposed to just putting it in real goods, or getting share of a business, etc. 

When money is a store of value, this encourages people to hoard it. This is especially true if they can lend it at interest; putting it in the bank is in effect lending it at interest to the bank, the bank then lends it at higher interest to credit card holders, mortgagers, etc. In this way wealth tends to concentrate into the hands of a few, and drain away from the many. Then when the wealthy few screw things up, it screws everyone up; whereas if wealth were more evenly distributed (not necessarily 1:1 for the top and bottom quartiles, but let's say 5:1 rather than 100:1), mistakes of the few would not ruin the many.

Having money as a store of value is thus inherently inflationary and creative of unemployment and poverty, since whether people hoard it at 0% interest, or lend it out at 5% interest, the total debt will always exceed the money supply. By definition, there's never enough money in the community to repay all its debts. The sudden realisation of this in the last quarter of 2008 was basically the cause of the US economic collapse.  But it also leads to other nasty things like environmental damage.

Let's say I own an acre of forest, and know I can take a cord of wood each year forever without damaging the forest. If money is not a store of value, how do I store my wealth? My wealth is in that forest - so I take care of it. But if money is a store of value, and if my debts exceed my income, I'll be tempted to cut two or ten cords of wood. Sure, that'll mean that in ten years I have no more forest - but if I don't repay my debts, I won't have the forest in ten years anyway. Thus, debt exceeding the money supply drives environmental damage. 

The solution then is to ensure that we have money which is a medium of exchange, but which is either not a store of value, or has a declining value over time.  Then we get a more reliable economy, and are less tempted to plunder the environment.  

The well-known examples of Worgl and the like show good evidence of this. Currency was issued, and had to be stamped each month to be valid currency, this stamp cost some fraction of the currency's value (one-tenth maybe, I forget how much). So your $100 paid you in January would be worth only $90 in February. This encouraged you to spend the lot today. 

Further back in history, the Egyptians had large granaries in which farmers were obliged to store their grain. When you brought in (say) 100lbs of grain, they'd give you a receipt for it, a clay tablet with "100lbs, January" stamped on it. Anyone who brought that tablet back to the granary could get grain in exchange. But because rats and damp and so on ruined the grain over time, if you brought it back in February, you'd only get 90lbs of grain for it, in March only 80lbs, and so on. So the grain tablets functioned as a medium of exchange which was a declining store of value - and people spent them quick, giving life to the rest of the economy.

It seems a crazy idea, but in fact inflation has the same effect. If I have $1,000 in cash in January 2008, I won't be able to buy as much with it in January 2009. My money declines in value over time. The difference is that while the Worgl stamps or the Egyptian clay tablets have a predictable decline in value, inflation is unpredictable. Which makes everyone nervous and leads to all sorts of financial shenanigans, as we saw with the subprime mortgages.

Obviously this combines very badly with lending at interest. If you can lend out $100 in January and have the right to demand that they give you $110 in February, then you make $20 profit, and again we have debt exceeding the money supply. So we'd have to ban lending at interest

This seems impossible to us in our debt-laden economy. How would banks function, how would houses be built? Yet Islamic banks manage it, and Jews through history have had many successful businesses in this way. Rather than lending $100,000 at 5% to a restaurant owner so she can double the size of her restaurant, the bank simply becomes a 50% shareholder in the restaurant, and gets a 50% share of the profits... and a 50% share in the losses. This makes banks very cautious about who they invest with, makes them look seriously and in detail at them.

Would this be a bad thing, for banks to become more cautious in their investments? Nobody would get rich overnight, but while missing out on the booms we'd miss out on the busts.

Locally then what we could have is a warehouse which takes in grain, timber, cloth and the like, things for daily life. In exchange for these goods which perish they give currency which declines in value over time.

This could also be an indirect tax system. If the goods actually rot away at the rate of (say) 4% each month, then the warehouse owners (the state) could have the currency depreciate at (say) 6% each month. The 2% difference is currency they issue to pay people in state service, being police, building roads, manning libraries and so on.

The currency could not (by law) be lent at interest. That combined with its depreciation would mean nobody hoards it, so it gets spent and encourages production of other non-perishable things. Because it's a declining store of value people would seek to store value in other things, like improving the land they own.

I think this would work very well locally. As for currency at a state, federal or international level, I don't know what would work best. But since I believe that peak oil will mean a reduction in the range of our lives, perhaps preventing even city states from working well (at least as large as they are today), this doesn't concern me a lot. Money exists because people trade, not the other way around.

Nukes are stupid

“Hey, we’ve got a problem with our energy.”

“What’s that?”

“Well, we’re relying on fossil fuels. We’re burning a finite resource, it’s not like iron or something that we can recycle, once we burn it, it’s gone.”

“Hey, I’ve got the solution!”


“Yeah! We’ll change to burning another finite resource!”


“Even better, this finite resource is really hard to burn well and safely, so we’ll need the best and most conscientious engineers and inspection regime ever just to make sure hundreds of thousands of people don’t get killed.”

“Awesome! But isn’t there a problem with waste, which no-one in the world has ever managed to permanently store safely?”

"There is that. But some people have plans for breeder reactors. These take ordinary depleted uranium and turn it into plutonium - they make new fuel! So we'd end up with at least one hundred times more fuel than we have now."

"But I thought that breeder reactors were unsafe and didn't produce very much fuel anyway?"

"That's all just greenie propaganda!"

"Not actual facts, then?"

"Okay it's facts, but the new designs will be safe and efficient, honest!"

"Won't there still be deadly waste, though?"

“Sure! But on the other hand, the waste from the burning process is also good to make weapons with, weapons which can kill millions in an instant. In an age of failing states, that’s just what we need!”

“Sounds great! When can we start?”

“Well, first we must get official approval, and push the official approval over the protests of the public, for some reason those idiots are against it.”

“Can’t think why.”

I believe in democracy. That’s why I propose that people should get to vote on what power source they want in their backyard. Because in the end, whether it’s objectively a good or bad idea, if that’s what the people want then they should get it. For some reason, those in favour of nuclear and fossil fuels never support my idea for a vote.  I wonder why? 

Austria, 1978 – in a referendum the Austrians voted 50.5% against nuclear power. They had 1 reactor under construction, plans to finish it off were not set aside until after Chernobyl.

Sweden, 1980: 12 reactors, they voted to “keep the 12 reactors in operation, but to shut them down at a later date by taking into consideration the welfare of the country and its economic development and the supply and demand of power in Sweden.” They have closed down 2. Basically they built up other sources and found they enjoyed all that extra electricity (they now have about 25,000kWh per capita annually, twice the US and three times Germany or Denmark).

Italy, 1987 – in a referendum the people voted to abolish nuclear power in their country, closing the three power plants which had in any case been closed since Chernobyl. They’re still closed, but Italy does not scruple to buy nuclear-generated electricity from France.

Japan, Maki, 1996 – residents of the town voted 60% to refuse land for building a reactor. Plans to build it there were dropped.

Taiwan, Yenliao, 1994 – residents voted 96.2% against two reactors in their region. Plans to build them there were dropped.

Switzerland has had many referenda on nuclear energy, with all voting to keep it or not phase it out.

Thus, it can be fairly said that of all the countries and regions in the world where citizens have been given a choice about nuclear energy, only the Swiss have chosen to have it. All the others given a choice have rejected it. But most countries have never bothered to ask their citizens. I wonder why?

Sunday, November 15, 2009

Global Plans and Muddling Along, Part I

Over on, there's an article having a go at Scientific American's attempt at "A Path to Sustainable Energy by 2030".

Mostly SA's is the "if we just have a Global Grand Plan, it'll be alright" sort of stuff. Technically possible, politically unlikely - better I think to muddle along.

But TOD's response is even dumber, "oh dear, it's all too expensive and difficult, let's just keep on truckin'." This is common from TOD (the US one anyway), but the editors have stocks in fossil fuel companies, so they're most anxious that we should not leave oil before it leaves us. Go read both articles. I put a comment at TOD, but they tend to delete anti-doomer stuff, so I put up this here, too.

The authour is concerned about the following points:

Aircraft - indeed, hydrogen as proposed by SA is a nonsense for aircraft. However, very little in terms of essential goods are transported by air. No more Chilean cherries in New York winter, oh well.

Ships - indeed, they are powered with fossil fuels, how could we transport stuff? But consider the scale of the issue. Currently, some 34% of shipping tonnage worldwide is devoted to transporting oil [source, p.16]. 96% of oil is burned. SA's article proposes no more burning of oil, so some 33% of world shipping can be scrapped.

World coal trade was about 718Mt in 2003 [source, p2], at the same time as total world trade was 6,500Mt, so that coal was 11% of world seaborne trade by weight. Coal is all burned (even if sometimes liquefied first), and again SA proposes stopping this; so another 11% of world shipping could be scrapped.

I could go on, but the point is clear: just by no longer burning oil and coal, we could almost halve our global shipping, thus halving the demand for fuel for it. This does not eliminate the problem of how to fuel the ships, but certainly makes it easier to deal with.

Automobiles and trucks - how do we make them all electric, Gail asks, and how do we power them. These don't need to be built or fuelled at all. We have some recent inventions called "trains" and "trams", which are in many parts of the world entirely electric, and which can thus be powered by renewable energy.

Many supposed "problems" are like this. When you look at changing every single piece of infrastructure to some new power source, things look difficult. When instead you look at what the infrastructure is supposed to do, things look much easier. We don't need cars and trucks. We need to transport people and goods. Cars and trucks are simply one way of doing that, and an inefficient one at that; other more efficient ways exist.

Farm machinery, etc - electric versions of these exist already as anyone can discover in five minutes with google.

Mining and manufacturing - are largely electric anyway. It's only when going for marginal ores that a lot of fossil fuels are used, eg in open-cut lowgrade mines. Of course, absent fossil fuels, our demand for things like iron ore will drop - electric (not electronic) things tend not to break down as quickly as fossil fuel-powered things.

"We'd have to build lots of stuff!" - we build lots of stuff anyway. So it's just a matter of building different stuff. In 2006, the world produced a bit under 50 million cars.

If we can produce 50 million internal combustion engine cars I don't see why we can't produce (say) 2 million electric train engines and 10 million electric cars.

Likewise, we are already building more coal-fired and gas-fired power stations. China alone is building one or two new coal-fired power stations each week. If they can do that, they can whack up wind turbines or solar thermal stations or whatever.

We build lots of stuff already. The only question is what we build: more stuff that burns fossil fuels, or more stuff that doesn't.

"We need to figure out how to do this, we need a plan" - a century or two ago we had this thing called the Industrial Revolution. People harnessed wind and water, then wood and coal, and finally gas and oil, and used its energy to build things. Nobody figured out any Grand World Plan To Burn Stuff. They just went ahead and did it and muddled along.

I don't see why we were able to just stumble along through an Industrial Revolution, but an Ecotechnic Revolution is supposed to require careful planning. I suppose because some people are rather anxious that we should not stop burning stuff, their stock in fossil fuel companies might drop too low.

"So how will we pay for all of the new equipment?" - the same way we pay for 50 million new cars, hundreds of new coal-fired power stations, and billions of plastic widgets every year. As noted above, we're buying all this ecotechnic stuff instead of this burning stuff, not as well as it. We already spend a fortune on stuff, the only question is what we'll spend on in future.

"But if we stop burning stuff, my Valiant won't be worth anything in 2028!" - Gail is worried about assets which would no longer have value. Well, so what? Electric typewriters, brick-sized mobile phones with satchel batteries, valve radios and buggy whips ain't worth much nowadays, too. Things become obsolete, that's life in a technological society.

"Will I get compensation for this loss of value?" - no, why should you? When we brought in personal computers, did anybody compensate the typing pool? When we brought in cars, did anyone compensate buggy whip makers? When we brought in transistors, did anyone compensate the valve glass factories? Again, things become obsolete, that's life.

"Too many rare minerals are needed!" - name them, and tell us why they're needed.

"What about all the power lines?" - yes, we couldn't possibly have a system where power lines criss-cross the country. Wait, what?

"When the power goes out, we're in trouble!" - how is this a change from today?

"Operating the system will require a huge amount of international co-operation, because the transmission system will cross country lines." - Of course, that's impossible. That's why the Danes never sold wind power to Sweden and Germany, and the Swedes never sold hydroelectric power to the Danes, nor Germany nuclear power to Denmark.

Good thing countries never buy vital goods and services from each-other. Imagine if the US were to rely on other countries for most of its energy? However would it cope?

"All of the high tech manufacturing will require considerable international co-operation and trade." - this is a bad and new thing?

"The system clearly can't continue forever. It could be stopped by a lack of rare minerals, or international disputes, or lack of adequate international trade." - It's not clear whether Gail is talking about the proposed ecotechnic system, or the current fossil fuel one.

North Korea shows us what happens when countries try to go it entirely alone. All worthwhile systems require some international co-operation, people honouring contracts, that sort of thing. Big deal. Adjust.

"Instead of the high tech approach advocated by Scientific American, we may want to find solutions that can be done locally, with local materials." - see now this at last is a piece of good sense. However, the two are not incompatible. We can have some international high-tech, and some localisation of stuff.

We will have no problem transporting people and supplying them with goods and services sufficient for a very good quality of life without burning fossil fuels. We may have problems persuading them to stop burning fossil fuels.

Wednesday, June 24, 2009

Time for a double dissolution election

The Labor federal government is trying to pass a Carbon Pollution Reduction Scheme. Basically, it's a carbon trading scheme in principle, and a carbon gifting scheme in practice - the biggest polluters will get free permits, and the funds raised from the sale of the other permits will be used to subsidise petrol, natural gas and coal to ensure that consumers don't end up with higher prices. Now, the whole point of any trading scheme or tax is to raise the price so that people seek alternatives. If fossil fuels become more expensive, wind and solar and taking a walk look more attractive. So if you ensure the prices stay the same, well then it's just another way of handing cash to big companies and squashing small companies.

Anyway, the Government lacks a majority in the Senate. To pass anything, they need either the support of the Opposition (Liberal-Nationals), or else the Greens plus the two independents. One of the independents is this bloke Fielding. Fielding represents Family First, a front party for the Christian fundamentalists the Assembly of God, your basic god-bothering fruit loops, playing with snakes, speaking in tongues and all that. He's a Senator from Victoria. He got in by accident: we have a funny system where we vote preferentially, numbering who we want from 1 to 150 (or however many Senate candidates there are).

Most people don't write all the numbers in, and just put a "1" in the party box, their vote then goes however that party says. Once they establish who first gets in, they start looking at everyone's 2nd preferences, then their 3rd, and so on. It's a bit like the decathlon - if you come (say) 3rd in every event, you win the decathlon overall. Well, Fielding got in because the major parties put the Greens last, and each-other second-last, and him in the middle. So while only 1.8% of people actually voted for Fielding, he was one of the six Senators elected.

The major parties aren't making that mistake again.

Now, if legislation is rejected unamended by the Senate a few times, the government can say "double or nothing!", ask the Governor General to dissolve both Houses of Parliament and call fresh elections. Then, assuming they win government, they have a joint sitting of the two Houses and force it through.

I think the CPRS is a load of bollocks, and a complete waste of time, yet another corporate handout. But it'd be an excellent chance to get rid of Fielding. Let's get rid of the fucking fruit loop and get someone with some more hearty breakfast food for brains instead.

Tuesday, June 2, 2009

Get up, keep running

Looking around at how people come to my blog, I found this interesting article, the one stone challenge. (By "stone" she means the old Imperial measurement of 14 pounds, or 6.3kg, in this case a stone of CO2e.) Essentially it's a watered-down emissions reduction programme, but with more things to keep track of. Praise to Emily for being pointed in the right direction, not so much praise for the slow pace she recommends. Like many Westerners, I think perhaps she doesn't appreciate the urgency of the problem. It's hard to - it's not in our interests to really understand it. 

If you enjoy accounting so much, then you can try the Carbon Account Challenge.

In this, carbon dioxide is the backing for a new currency, the Carbon (¢). Your allowed emissions are treated as an "income". You can earn more income from planting trees and harvesting food. If you are a truly profligage Carbons spender today, perhaps you could take four months to reduce to the current Western average, ¢1,000. Then reduce this by ¢10 every month until you reach the world average spending, ¢300. After that you reduce it by ¢5 per month until you reach the safe level of ¢100 a month.

So you take 4 months to get to the Western average; then 70 months, almost six years, to get from the Western to the world average. Then you take 40 months, three and a half years, to get from the world average to a safe level. In all, in nine and a half years you've gone from profligate wasteful spending of Carbon to a level the world could sustain forever.

People generally take 2-5 years to completely change their lifestyle. In 2-5 years you can move to a new country and learn a new language, get married and have children or get divorced, find a new home and be well-settled in, get a new qualification and a new career, become depressed and suicidal, get deadly cancer and go through chemotherapy, go from being grossly obese to a bodybuilding champion, and so on.

So you ought to be able to make significant changes in your carbon-spending lifestyle in almost ten years. I double the time because you often have to drag a reluctant family along, and a lot of it depends on having the available infrastructure around, like buses and trains and decent food and wind power available from retailers, and that often takes longer than individual changes. You can get all that with moving house or workplace and lobbying local government, and do it within ten years. If you can't, well it's not that you can't it's just that you're not trying. Ten years.

As Emily says, small steps do take you towards a far goal. However, I'd say that one stone is a bit too small a step. It becomes a token effort we know is useless, like Earth Hour.

The thing is that all these carbon calculations are not terribly precise. Maybe my coal-fired station is a bit worse than yours, so that I only get 4kWh for a stone compared to your 7kWh. Maybe my beef is grass-fed instead of grain-fed so it farts less.

In the Carbon Account Challenge, these inaccuracies come out in the wash, in that however inaccurate the particular figures, over time you'll see if the trend in spending is generally up or generally down. That's a bit harder if you've got 157 things to keep track of.

The other issue is that Emily's presented it as "carbon saved." But the problem is not how much carbon we're saving, rather how much we're spending. If I drink ten Guinesses tonight, it will not help my head tomorrow that I said "no" to two more. Ten was nine too many. It's easier to keep track of the drinks I did have than the drinks I might have had but didn't. I cannot "save" drinks, I either drink them or I don't.

Likewise, we cannot "save" emissions. If (say) 1,000 billion tonnes of carbon dioxide will turn our planet into misery, that we "saved" 10,000 billion tonnes won't matter. All that matters is the emissions we make. We have to get them down, and fast. It may be too much or too hard, but we've not any choice.

Once in the Army I saw that when blokes fall down on a cross-country run, a corporal or sergeant comes along and kicks them in the guts until they get up and keep going. Lying there gasping, you have a choice: you can lie there being kicked, or you can get up and keep running. Most get up and keep running.

That is overly brutal and people shouldn't do that to each-other, but that's what the Earth is doing to us. Hurricane Katrina, the Black Saturday bushfires, the Bangladesh cyclone, drought in Australia and the Sahel - the Earth is kicking us in the guts and saying, "get up, keep going."

We can lie there in airconditioned comfort and in our SUVs munching on our burgers, and keep getting kicked in the guts by global warming. Or we can switch it off, get out and walk and find a decent meal, and keep running. It's shitty and hard and unfair but we have no choice. As you can see from my carbon account in the sidebar, I'm overspending, so I understand the difficulties. But it's no-one's fault but my own. I take responsibility for my actions and inactions both.  

It's also a social justice issue. As Sharon Astyk likes to relate, one Bangladeshi man was interviewed after a flood. He said, "I am told that the flood happened because of greenhouse gases and global warming. But I swear to you, I have never owned a single lightbulb."

We're being kicked in the guts, but they're being kicked in the balls.

Get up, keep running. You have ten years to get there. Hurry up. 

Monday, May 25, 2009

Being green and spending green

or, the trouble with rooftop solar

This article, which also appears at TheOilDrum:ANZ, looks at domestic solar power in Australia, asking: is it worth it?

It does not talk about large-scale solar systems, but focuses on grid-connected solar photovoltaic cells on a home's rooftop. The article looks at it from the perspective of the one who actually decides whether or not to install it: the homeowner. It may or may not be worthwhile from the point of view of society as a whole, but at present the decision is up to the person who owns the house. This article came about from my own research as my household, here in Melbourne, considered getting a rooftop solar photovoltaic system. In the end we've decided not to.

There are several things to consider: vanity, society, systemic, security, environmental, and financial. But first some background.

Photovoltaic cells convert light to electricity. Obviously, they produce electricity only when there's sunlight, and more or less depending how high the sun is in the sky and how overcast it is.

Photovoltaics produce a direct current which can go straight to recharging batteries, or to devices which use direct current like any battery-driven device, some specially-designed refrigerators, etc. Most household appliances use alternating current. Thus, with the solar PV must come an inverter, which changes the direct current to alternating so that the household appliances can use it.

In a stand-alone system, such as is found in outback Australia, the house isn't connected to the electricity grid, and so they have banks of batteries to store the energy generated during the sunny days. In a grid-connected system, the house draws power from the grid normally, but the electricity from the cells goes to the grid, too. In practice, the cells generate more electricity than the household uses during hot afternoons, and the house draws from the grid the rest of the time. The standard installation for a grid-connected system includes the solar panels, the inverter, and a new electricity meter; it does not include batteries.

The major obstacle to widespread use of photovoltaics is the cost. A grid-connected 1kW system might be around A$17,000 all-up. Various federal and state governments have offered rebates and encouragement to lower this cost; these will be discussed in the "finances" section. Apart from ordinary politics, the purpose of these is to ease the peak load. If a region normally uses at most (say) 1,000MW of power, but then on a hot summer's afternoon uses 1,500MW, the region must have 1,500MW of capacity in its power plants, or buy the energy in from another region. As well as the expense of new power plants or energy importing, the various power lines have to be tougher, too, so this means more infrastructure and maintenance, etc. That's a lot of expense and hassle for what might only be 7 days a year when that peak capacity is needed. Enter photovoltaics - they produce the most power at the same time as the peak demand.

There are some rebates for wind and other forms of generation at the domestic level, but since most of Australia's population lives in relatively sunny and dry areas, the focus of efforts so far has been on solar.

If you're a person with a greenish tint around the edges, it'll feel good to have solar panels on your roof. What the SUV or iPhone is to the yuppie, solar panels are to the greenish middle-class. I don't see anything wrong with this, if we did nothing for ego and image, we'd be a much grubbier-looking people. It's a statement of who you are and what you believe is important, and it feels good. Part of making a statement is having somebody listen - society.

Between fossil fuels running short and their extraction and burning causing various kinds of harm to the world we live in, whether civil war in Nigeria and Iraq or global warming, it's plain that we can't keep burning so much of the stuff forever, and eventually we must burn none at all. However, people are reluctant to accept this. In physics, inertia is the tendency of an object to keep moving at the same speed and in the same direction as it was going unless it's acted on by an outside force. Societies have a kind of inertia, it can take quite a bit to make them change.

We ought not to overestimate this, however. As Solnit writes in "Revolutions per minute",

"Sex before marriage. Bob and his boyfriend. Madame Speaker. Do those words make your hair stand on end or your eyes widen? Their flatness is the register of successful revolution. Many of the changes are so incremental that you adjust without realizing something has changed until suddenly one day you realize everything is different. [...]

"Although we typically associate revolution with the sudden overthrow of a regime, the Industrial Revolution was an incremental change in everyday life and production that began a little over two centuries ago and never ended. [...]

"The fantasy of a revolution is that it will make everything different—and regime-changing revolutions generally make a difference, sometimes a significantly positive one—but the making of differences in everyday practices is a more protracted and incremental and ultimately more revolutionary process."

The idea that we must burn less fossil fuels today, and one day we will not burn any fossil fuels at all is a radical idea. It's so radical that many people say it's impossible, insisting that easy oil reserves are sitting around waiting to be discovered, that we must await some technological breakthrough to use renewables in any significant way, that we'd have to "live in caves" to do it, or that if we even try to do without fossil fuels there'll be a "dieoff", or that it can be done in principle but we don't have enough time and the attempt to build the infrastructure will be the final burst of carbon dioxide that pushes us over the edge into catastrophic global warming.

The social benefit of having solar panels on your roof thus becomes clear: it makes the radical seem ordinary. If you walk along a street and half the houses have the blue shiny panels on them, it's hard to keep thinking change is impossible. They start to seem rather mundane - boring, in fact. When the radical seems ordinary, we stop objecting to it and standing in its way, and usually claim we supported the idea all along. If I want to effect social change in the direction of let's burn less stuff, solar panels on my roof seems good.

As noted earlier, power generation and grid capacity must be kept at a level which can match the highest demand placed on it, even if that demand only shows up a few days a year and is normally much less than that. That's a lot of expense and hassle. Here in Melbourne we've experienced a failure of generation and grid capacity to meet demand, suffering blackouts of a few days as large supply lines or power substations went down from overheating, leading to mass train cancellations and many other disruptions.

In Australia, peak demand happens at the same time as peak generation of rooftop solar. Thus domestic rooftop solar seems a good solution to the problem of our hot days, as it lessens the demand on the large power stations and the grid as a whole. It has a systemic benefit - helping prevent the system from breaking. Of course there is a cost to this, but already we pay taxes to help the system as a whole avoid breaking, at least in this case we'd be choosing exactly what our money goes on.

In 1998 alone, Melbourne lost natural gas supplies for about two weeks, the Auckland CBD lost electricity for some five weeks, and Sydney's water supply became undrinkable. There are many other cases of interruptions to supply due to poor maintenance of infrastructure in our region. It seems reasonable to expect that in a decade of living in a home, we may lose supply of a single utility for up to 28 days, and of all three utilities for 2-7 days. Thus, it seems prudent to have your own gas bottles, water tanks and electricity supply that can keep you going for one to four weeks, though obviously at much reduced consumption.

Unfortunately, a grid-connected system on its own does not improve our electricity security. We have to have a battery system for that, and it's not a standard installation, costing about another $2,000. More in the "finances" system.

The greenish Westerner wants to live relatively lightly on the Earth, to have the least impact they can while still having a decent standard of living. Here in Victoria, we have the dubious distinction of having the dirtiest power station in the industrialised world at Hazelwood, built from 1959 onwards. ; it emits about 1.58kg CO2e per kWh [source: Hazelwood West Field EES La Trobe Planning Scheme Amendment C32, Independent Planning Panel (2005)], compared to more typical numbers of 0.8-1.3 kg CO2e/kWh for other coal-fired stations. In Melbourne in 2003 the average household consumed about 6,265 kWh of electricity, which would thus cause about 9.9t of emissions if all got from Hazelwood.

However, we're not obliged in our households to buy this power. We can put up solar panels, or we can buy renewably-generated electricity from our retailers.

The federal government has set up a Greenpower accreditation system. Basically, any renewable power created since 1997, and not involving the burning of native forest or reduction of environmental flows to rivers is counted. We have a privatised electricity system - one company will own a power station, another will buy wholesale electricity from it, and a third will retail sell that electricity to industry, commerce and households. Households can ask their electricity retailer for renewable electricity.

Now, if the household buys renewable energy, that does not mean the company sets up a special power line from the wind turbine to the home. It just means that if during the year the household buys (say) 6,000kWh of electricity from the retailer, the retailer must buy 6,000kWh of electricity from the owners of the wind turbine. The particular electrons you get may have come from Hazelwood, from the Snowy hydroelectric project, from your neighbour's rooftop solar, or some mixture of those; but your money goes to support the renewable energy generation.

Naturally, if more people ask for renewable than is being produced, the price of renewably-generated electricity will rise, and more companies will build renewable energy. That is, if say 20% of generation is renewable but 25% of consumption is from people buying GreenPower, they'd have to build another 5% of generation. Currently, this is not the case; demand for GreenPower is less than supply, as I wrote in green states and brown. The most recent Greenpower report [2Mb pdf of 2008-Q4] tells us that there were 476,762MWh of GreenPower sales in 2008-Q4; if this were annual, it would be 1,907,048MWh, or 1.9 billion kWh. The federal government's Mandatory Renewable Energy Target includes 9.5 billion kWh generated by 2010 and 45 billion kWh by 2020, compared to total 2007 consumption of about 240 billion kWh. So the household demand is considerably less than the current supply of renewable energy; this is probably because it costs more.

On the other hand, household electricity consumption as of 2006-7 is only about 231 PJ, or 64 billion kWh, and 2008-Q4's GreenPower consumption was a 37% rise on 2007-Q4.

The GreenPower-buying households are subsidising the non-green majority, but the GreenPower buyers are increasing rapidly. If renewables are installed quickly enough to meet the 2010 and 2020 targets (about 25% rise annually), and if demand continues rising as quickly as in the past few years (about 35% annually), demand for GreenPower will exceed supply in 2020. That is, government regulation and subsidy drive the growth in renewables to 2020, and the market drives it afterwards. I don't know if this is a fair assumption, but it seems to be the government assumption.

It's clear that either buying GreenPower or installing solar panels on your roof will have less environmental impact than simply buy standard coal-generated electricity. But it's not clear that having solar panels on your roof is any more or less environmentally-friendly than simply buying GreenPower from your retailer. In general, economies of scale will mean that a single large power station, whatever its power source, will have less emissions per kWh than many smaller power stations - for example on your roof. Would 1,000 1kW rooftop solar units have more or less impact than a single 1MW unit out in the countryside somewhere? Logically, they'd have more impact, needing more wires and inverters and maintenance and so on per kWh generated. However, I know of no formal study examining this in detail.

In sum, the environmental case for GreenPower or rooftop solar against conventional power is clear; which of the first two is better isn't clear.

We have established that a greenish person will want to get their electricity renewably, and will contribute to grid stability by having a rooftop solar photovoltaic installation, with the environmental case being strong for abandoning coal, but undecided for GreenPower, and that security of supply can't be had with a standard installation as it lacks batteries. But how much does all this stuff cost, and will it pay for itself?

Buying electricity retail
Conventional electricity retails at (including sales tax) A$0.18469/kWh, and wind-generated electricity adds a tariff to bring it to $A0.23969/kWh. There's also an A$174.90 service charge which we have to pay regardless of how much or little we use, so we can set it aside as a cost for the moment. The retail figures thus give us a baseline to judge the worth of the solar systems - how long before they generate enough electricity to pay for themselves?

If you have a rooftop solar system, each quarter they add up all the electricity you imported from the grid, and subtract all you exported into it. If you used more than you generated, you pay the same retail rate for the rest. In Victoria there exists a net feed-in tariff, so that if you generate more than you consume over a quarter, you are paid A$0.60/kWh for it.

A third consideration is that with fossil fuels peaking, countries considering various kinds of climate change avoiding/mitigating treaties, and a water shortage in Australia, we can expect that electricity will only get more expensive. Generating your own insures against retail consumption price rises, though does not insure against service charge rises.

The system and its retail cost
A typical household will be able to fit 1k-3kW of panels on the rooftop; a typical 175W panel is 1.3 x 1m and weighs about 16kg. Obviously a north-facing roof is needed to get a good output of power, and with the typical pitched roof this means only a quarter the area is available to use, so few people will be putting 5kW systems up there. I don't want to be seen as endorsing any particular company, but a websearch will show that the retail cost of solar panels in Australia is $10-$15 per Watt once you're in the kW range. So you're looking at $10,000 to $45,000 for the 1-3kW.

The inverter comes next; the larger the capacity of the panels, the tougher the inverter needs to be. This is not very big, around 60cm x 30cm x 20cm and a few kilograms, though bigger if it must be outside and waterproofed, or inside and silenced (they give out a "hum" like transformers in the street) and is usually another $2,000 or so.

Lastly there's the meter: conventional electricity meters are designed only to measure power going one way, so a "smart meter" must be installed. Typically the solar panel company has nothing to do with this, and the customer must get their electricity retailer to do it. Enquiries with my own retailer told me,

"The cost of a new electricity meter is approx $180 for single phase or $315 for poly phase meter. This is charged directly by your electricity distributor. There will also be a truck fee of $290. This will be passed through to you on your electricity bill from the electricity distributor. If your electricity box is not up to relevant electricity standards [ie is more than 25 years old], there will be a cost to upgrade. This cost could be up to $1500."

Thus, $500-$2,000 for the meter. It's notable that unless you spend $250 on a "site inspection fee", you cannot know exactly what it'll cost to change your meter over. It's a gamble.

If you want a stand-alone system, you'll want some batteries. A battery holding 5-10kWh worth of energy will retail for around $2,000.

Labour is typically folded into the retail costs. There are other expenses to push things up. For example, if you have a tiled roof, the panels require extra supports, which adds $150-$400 to the cost.

In all, taking we could be looking at $15,900 for a grid-connected 1kW solar system without rebates, or $17,900 for the same with battery backup for security.

The rebates and retail cost
The federal government offers $8/W as a rebate, with a minimum of 450W and maximum of 1,000W. In practice, nobody bothers installing anything less than 1kW. Essentially it's $8,000 off your 1kW system.

There also exist renewable energy certificates. For each 1,000kWh of electricity expected to be generated over 15 years, a certificate is issued. This REC may be bought and sold, and companies buy them to fulfill their renewable energy targets. For example, Hazelwood power station can be considered 20% renewable if it buys enough RECs. When installing rooftop solar PV, typically the householder surrenders their RECs to the installer who then sells them. This drops another couple of thousand off the price of a system.

Thus the panels and inverter cost of around $14,500 drops to about $4,000; the cost of meter and any extras remain unchanged. The capping of the rebate at 1kW means a big jump in price from a 1kW to a 1.5kW or larger system. Thus 1kW systems appear to make up the bulk of the market.

Last year the rebate system was too successful, with the federal government having to pay out more rebates than it had budgeted for. In response they put a means test on it; if the household earned more than $100,000, they couldn't get a rebate. In practice this removed a good chunk of the rooftop solar market, as even with all the rebates and RECs, it was still several thousand, and households with an income of less than $100,000 aren't likely to have several thousand to blow in one go. After June 30 2009 the rebate will be abolished entirely, and a higher price put on the RECs instead. It's expected that this will cause the cost of a typical 1kW system to rise about $2,000-$3,000 (see the website of any rooftop solar installer for quotes before and after 30/06/09.)

"Buy now!"
This imminent price rise has caused a surge in demand as people who were humming and hawing over getting the system in a rush to do it before it gets too expensive. Companies have responded to this by buying solar photovoltaic systems in bulk from China and Germany. The bulk buying has let them get the things cheap.

A typical offer from a long-established power company is $4,000 for panels and inverter for a 1kW system. New companies have offered systems of $2,500, and there is even one offering it for free. Generally, you pay the listed price, with the $8,000 rebate and the RECs being paid directly to the company. In the case of the "free" offer, you pay $8,000 and then the federal government pays you back later; so even though it's "free" you still have to have $8,000 spare for a few months.

While researching this I was of course initially quite attracted to the cheaper companies. However, I noted that no history could be found for these companies; they appear to be quite new. What happens to them once the big rebate ends and their market shrinks? A consideration in any large purchase is the warranty. Most companies offer a 25 year warranty for rooftop solar. If my $20 toaster conks out after month, I simply swear a lot and buy another one. If my $4,000 rooftop solar fries out after a couple of years, it could cost in the thousands to get fixed, so I want them around to honour their warranty.

Thus, for the price today, the smaller and new companies look good, but it could end up costing us more in the long run with repairs after a dishonoured warranty. It could be worth the extra $2,000 or so to know that they'll still be around ten years from now.

Payback time
A 1kW system in the Melbourne latitude and climate we can expect to generate around 1,825kWh a year, or 5kWh/day on average. around 3kWh/day in winter and 8kWh/day in summer. The average Melbourne household with its 6,265kWh of consumption, or 17kWh/day (generally about 14kWh/day for households with gas hot water and cooking, and 21kWh/day for all-electric households), will almost never generate more than it consumes; the net feed-in tariff of A$0.60/kWh can be forgotten.

However, it's possible for a household to reduce this consumption. We can use cool drinks and fans not airconditioning, jumpers and hot drinks not heating, hang washing out to dry, change to CFLs and pull plugs out on appliances not in use, and in this way get it down to about 5kWh/day (as my own household has done). But the net feed-in tariff is still a non-issue. With a standard 5kWh/day consumption, the 2kWh bought from the grid in winter (at conventional rates) would cost some $33, and the 3kWh/day exported in summer would earn $162, leaving $129 profit annually, which is not nothing, but not huge, and that level of export is easily wiped out by some airconditioning use. In usefulness, the net feed-in tariff is really for larger installations of 3kW and up.

In practice, we must simply calculate the dollar value of the electricity generated by a system.

1kW system, 1,825kWh/yr

Eq. conventional $0.18469 $337

Eq. wind $0.23969 $437

We can then divide its cost into the savings made to find the payback time. For the savings made I choose a middle figure of $400 annually; over the next decade we can expect the price of conventional electricity to rise by that sort of amount, and some people may prefer to compare rooftop renewables with retail renewables.

Below a table shows the initial cost of the 1kW system, and the resulting payback period. The minimum solar panel and inverter cost is zero, as I described above, but another $1,000 for reinforcing frames and meter changeover seems to be the minimum.

1kW system costs and payback

$1,000 2.5 years

$2,000 5 years

$3,000 7.5 years

$4,000 10 years

$5,000 12.5 years

$6,000 15 years

$7,000 17.5 years

I am told that in business a payback period of under 5 years is considered a certain thing, while more than 10 years it's dismissed without thought, since anything could happen in ten years, and that could change everything. Thus 5 to 10 years is where people become uncertain.

The $1,000 and $2,000 systems have payback periods of 5 years or under, but can only be got from companies we're not certain will be around in ten years. I don't know how much it costs to repair a typical solar panel fault, but when we had a blackout in February the bill was $275 just for the callout, so it seems safe to assume $1,000 or more is plausible.

About the cheapest you could hope for with a reputable and established company is $5,000 - $4,000 for the system, and another $1,000 for rooftop reinforcement, meter changeover and so on; as noted earlier, you usually won't know the meter changeover cost until the solar panels are already installed.

Thus, if you want a rooftop solar photovoltaic system, you can have a short payback period but with risk of further costs, or a decade-plus payback period but with certain costs.

Every householder must weight up the different considerations of vanity, society, systemic, security, environmental, and finance. Each plays into the other. For example, a standard grid-connected system offers no batteries, and thus no security of supply; adding batteries adds to the cost and the payback period.

For our household, our vanity was already satisfied by the other greenish things we did, and we felt they also made a social contribution. The systemic contribution would be small, and since we didn't plan on having batteries we'd have no security of supply. As for the environment, we already buy GreenPower, so it was not an issue for us; and this costs us an extra A$0.055/kWh, or $100 a year for our 5kWh/day - or $1,000 over 10 years, considerably cheaper than solar panels.

That left only the financial aspect - would we be financially better off?

The system may or may not repay itself in increased real estate value. Too few households in the country have solar panels for us to be able to tell; it seems reasonable to assume that every extra thousand on improving a house adds a thousand to its value; it could be more but we don't know. In any case we expect to be living in our house, not selling it, nor will we use our mortgage as a low-interest-credit-card, so whether it's worth more or less doesn't matter to us.

Taking the expected cost of $3,000-$5,000, a return of $400 annually on that is a decent rate of 8-13%. However, we are halfway through our mortgage, so we had to consider what $3,000-$5,000 now could do in avoided interest payments. The net gain is thus 2-5%, depending how interest rates go over the next decade. That's not much on inflation, and so we expected effectively zero financial gain from installing rooftop solar.

As the other considerations were for us not issues, and as we expected zero financial gain over the next decade from installing them, we decided not to. We'll continue buying GreenPower, and leave building renewable energy generation to big companies.