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Will "brownouts or huge price spikes" magically disappear once we move towards sustainable energy sources, or will we also need to manage these market manipulation and regulation?

Reading this thread reminded me of what you wrote in Guillotines, da Vinci, peak oil and discount rates:

We're all familiar with business cycles: there is growing demand for one product; prices can be very high; people rush to provide the good and offer the suppy that will fulfill that demand; the first comers get excellent prices; as new sellers come in and supply increases, prices goes down and more demand is created; the sector booms and more suppliers poor in; but at some point, prices become too low and new sellers are discouraged, and some of the existing ones drop out until demand can catch up, and prices can go back up.

In particular, I was wondering if this passage could eventually apply to wind power (and alternative energy in general):

Same thing in the power sector in the late 90s, when an investment boom in gas-fired power plants created a glut of power and rock-bottom prices that left a lot of investors (and their financiers) in the dust. Demand is now catching up after several years of little investment, and we again get brownouts or huge price spikes.

Based on your comments above, it seems that the mad rush for onshore wind power has already started.  Could that mad rush extend to other sectors, such as offshore windpower?  If and when it does, will there be destructive boom and bust cycles there as well?

If so, at that point will we have to take into consideration the recommendations that you made in that other diary (if I understood it correctly?):

Markets are unable to anticipate the sea change that stagnant production at a time of sharply increasing demand will mean, and the requisite demand destruction, which could be brought about in an organised fashion via a combination of market manipulation (taxes to increase the apparent price) and regulation (to encourage or impose energy efficiency, for instance), will happen brutally, via huge price increases and the serious economic dislocation that will entail.


Truth unfolds in time through a communal process.
by marco on Thu Nov 30th, 2006 at 10:15:12 PM EST
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