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European energy policy debates

by Jerome a Paris Wed Apr 21st, 2010 at 04:08:39 AM EST

There have been quite a few substantial contributions to the European energy debate recently, including Towards a European Energy Community: A Policy Proposal, by Notre Europe and A Smart EU Energy Policy by the Clingendael International Energy Programme. I haven't had the time to read these and do them justice, but the article in the European Energy Review on the latter had an interesting tidbit:

Unlike the former EU President Jacques Delors, who in a recent report argued that there is no common European energy policy, De Jong and his fellow-authors do believe that ‘there is indeed a EU energy policy’, as their report puts it. It is the ‘three-tier approach’ that the European Council agreed on in the spring of 2007. This approach is based on three pillars, which are known for short as “Lisbon” (the idea of an internal, competitive market), “Kyoto” (the pursuit of a sustainable energy economy) and “Moscow” (which is short-hand for the pursuit of security of energy supply).

The main problem is, says De Jong, that the way in which these three policies are implemented is frequently at odds with each other. Hence the call for ‘integration and coordination’.

This is the first time I see in a "serious" publication the idea I have long developed that the 3 core priorities of the EU (competitive markets, climate change and security of supply) are incoherent and incompatible... The report complains that renewable energy subsidies damage security of supply (by making upstream investment less profitable, and reducing security of demand for external suppliers), which is technically correct but demonstrates a rather too narrow gas-focused mindset (not completely surprising from a Dutch institution)... but at least they see some of the contradictions between the various objectives, and the "Kyoto" "Lisbon" and "Moscow" labels are useful.

Hopefully this will help push the debate forward.


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The report complains that renewable energy subsidies damage security of supply (by making upstream investment less profitable, and reducing security of demand for external suppliers)

  1. I don't get how it is subsidized renewables that make upstream investment less profitable.

  2. Reduced security of demand for external suppliers might reduce those suppliers' willingness to build new infrastructure. Infrastructure which would increase (or at least solidify) the EU's import dependence...


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Apr 21st, 2010 at 05:37:00 AM EST
As I understand it, security of demand for external suppliers means guaranteeing dependence on external supplies, which European energy policy is supposed to aim at reducing. Renewables are here being blamed for being indigenous, and foreign energy dependence promoted.

Lobbies at work...

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Apr 21st, 2010 at 06:02:48 AM EST
[ Parent ]
'subsidizing' renewables presumably reduces demand for gas, which is the main alternative source of power these days (although that argument forgets the screams by the power industry against wind for needing 'back-up' and the reality that gas-fired power plants are quite compatible with wind...)

And the link between demand certainty and upstream investment (and midstream infrastructure) is real, but if you don't have the demand then you don't need the investments either...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 21st, 2010 at 10:00:26 AM EST
[ Parent ]
'subsidizing' renewables presumably reduces demand for gas, which is the main alternative source of power these days (although that argument forgets the screams by the power industry against wind for needing 'back-up' and the reality that gas-fired power plants are quite compatible with wind...)

This seems to be the case in Spain, where there's pushback against the current system of electric feed in tariffs which favor wind and solar over combined cycle gas.........

As it stands now the feed in tariff for solar is through the roof, and something like 2000 MW of thermal solar capacity are going to be coming online in the country in the next 1-2 years.

On an up note, I think that the "demand reduction" approach to renewables, that is arguing that having wind online means that you can cut the capacity factor at natural gas and coal fired plants, is a huge public relations argument that hasn't been well made.

Particularly where it reduces demand for coal, the carbon savings of wind on a marginal bases are through the roof.  If there was a carbon trading scheme in place, I'd think that you could funnel fees from carbon emissions into wind.  That would help provide a source of funding to get renewables off the ground.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Apr 21st, 2010 at 10:11:45 AM EST
[ Parent ]
is that wind, a zero-marginal cost generator brings wholesale prices down, thus reducing revenues for baseload producers (nuclear, coal, and high capacity gas CCGT), ie the incumbents.

At current levels of penetration in Spain, that merit-order effect bites into utilities revenues seriously (the savings for consumers are larger than the cost of the feed-in tariffs, thus making "subsidies" for renewable energy paying for themselves instantly).

But nobody EVER discusses this.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 21st, 2010 at 10:20:19 AM EST
[ Parent ]
<blockqoute>But nobody EVER discusses this.</blockqoute>

This is extremely unfortunate, because this is probably the strongest public relations argument for the introduction of renewables, because it turns the argument that this will drive up costs on its head.  

In fact, the introduction of renewables drives down the wholesale price of power, in effect creating competitive advantage.  Delaying that creates the same sort of rent-seeking that you see with financial sector.  

Is there any sector of the economy where private rent-seeking isn't a major component of profits?

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Apr 21st, 2010 at 10:27:28 AM EST
[ Parent ]
Is there any sector of the economy where private rent-seeking isn't a major component of profits?

No. The payment of the factors of production is always in large part politically determined, so all profits (and all wages, for that matter) are always in large part zero-sum rent seeking.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Apr 21st, 2010 at 12:09:17 PM EST
[ Parent ]
Spot on.

And that is precisely why market architecture will continue to evolve - driven by increasingly direct connections - to a dis-intermediated model within a partnership framework.

In fact, the evolution of 'for profit' transaction intermediaries to service provision is ongoing, because capital requirements are thereby minimised. Moreover, a partnership framework is inherently co-operative, and within such a framework there is no profit and no loss.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Apr 22nd, 2010 at 11:04:09 AM EST
[ Parent ]
ManfromMiddletown:
In fact, the introduction of renewables drives down the wholesale price of power, in effect creating competitive advantage.

bingo, that's why they've been fighting renewables tooth and nail, first with lies, then obfuscation, and more lies.

it's worked, because so few people are shifting gears on this, and even for those who want to, here in italy the bureaucracy is such a documentary minefield, i heard of someone giving up half way the other day.

meanwhile the friend i recommended to the guy that sorted me, has finished his installation, the company is giving me a cut, and my friend has already found 4 more clients.

the engineer who did mine was so 'on it', nothing fazed him, and he terriered through to the end.

that kind of tenacious competence is as rare as rubies in the dust around here...

there are even ads on tv touting it, but the average consumer is still balking, eve with total financing from the banks, (which my friend did, making the payback period 11 years instead of 7 if he had financed it himself, before all the power he 'creates' is all his.)

when i think about all the hard sell tech used to sell every kind of crap under the sun (sic), it is quite maddening to see such a magnificent opportunity fro Italy to become self-sufficient, or at least much more so, so weakly promoted.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Apr 21st, 2010 at 01:57:19 PM EST
[ Parent ]
Oh, Jerome, some of us do discuss the merit-order effect. There's you, me, and Henrik Lund for starters.

And now, happily the EWEA and Pöyry (4.6MB pdf) do too.

The report finds that in the studies reviewed by Pöyry, electricity prices were reduced by between 3 and 23 €/MWh depending on the amount of wind power.
by LondonAnalytics (Andrew Smith) on Thu Apr 22nd, 2010 at 05:25:00 AM EST
[ Parent ]
well, the German Ministry for environment (who see themselves as the founders of feed in tariffs and view this as yet another "export" of Germany) have also looked into this, together with the very renowned Fraunhofer Institut. See

http://www.bmu.de/files/pdfs/allgemein/application/pdf/gutachten_eeg.pdf

by crankykarsten (cranky (where?) gmx dot organisation) on Thu Apr 22nd, 2010 at 04:12:50 PM EST
[ Parent ]
How on earth did nuclear and coal get in that list:

As De Jong puts it:"`Current competitive markets offer insufficient guarantees for long-term investments in large-scale alternative energy sources, such as nuclear power stations, offshore wind parks and CCS projects'.

Reminds me of Desproges' joke:

Which of the following does not belong with the others:
Metastasis, Schwartzenberg, cancer, future.

Rien n'est gratuit en ce bas monde. Tout s'expie, le bien comme le mal, se paie tot ou tard. Le bien c'est beaucoup plus cher, forcement. Celine

by UnEstranAvecVueSurMer (holopherne ahem gmail) on Wed Apr 21st, 2010 at 07:56:17 AM EST
How will one stop the black market in coal? With a large skew in price between coal and sustainable energy, and with coal easily available in lots of places, will we have armed guards around all the places you can dig it up?
by asdf on Wed Apr 21st, 2010 at 08:06:09 AM EST
[ Parent ]
I'm talking about the surprising use of the word "alternative" to describe the fuel of the first industrial revolution and nuclear power.

As for whether we can effectively put aside coal when energy scarcity increases, the answer, in the abstract, is no. But we're certainly not in the abstract. To reuse the article's classification, coal goes against Kyoto and Moscow (iirc there isn't that much competitive coal in Europe) and thus is a tough technology to promote.

Rien n'est gratuit en ce bas monde. Tout s'expie, le bien comme le mal, se paie tot ou tard. Le bien c'est beaucoup plus cher, forcement. Celine

by UnEstranAvecVueSurMer (holopherne ahem gmail) on Wed Apr 21st, 2010 at 09:23:47 AM EST
[ Parent ]
cute, ain't it?

here in Italy we have dioxin-spewing trash incinerators classed as 'renewables' too.

as for coal, it's CCS! so relax...

/snark

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Apr 22nd, 2010 at 03:39:56 AM EST
[ Parent ]


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