Against Alex Tong (童遷祥)

I started writing this late last night (just finished it off now) - I couldn't sleep because of a mosquito on the loose and for some reason my mind wouldn't switch off even at 3.30am. At about midnight last night, one of the locals threw a chair at the dogs after they barked at him; he'd been making a noise in the park long after lights out. I impressed upon him the importance of not repeating that. When I checked on them at lunch time, they were OK.

Anyway, there is an energy op-ed in today's Taipei Times by one Alex Tong (童遷祥) who apparently is "vice president of the Industrial Technology Research Institute" which seems to be some sort of quango. A quick look...

"Using renewable energy along with saving energy is a two-pronged strategy to solve the energy crisis by combining the development of new energy sources with energy cutbacks."

My emphasis. What exactly is meant by "energy cutbacks" is important: there is all the difference in the world between using less energy to perform the same tasks (efficiency), and simply using less energy overall. At no point in the article does Tong specify what he means. One consequence of using less energy overall would be a fall in manufacturing productivity, and a possible increase in unemployment.

"It is still a very common belief that renewable energy is prohibitively expensive and therefore can only be used to meet small-scale needs."

Renewable energy is relatively expensive, but whether it is "prohibitively so" is a value judgement which ought rightfully be reserved to individual investors and consumers in a free market. If enough people want their electricity to be produced by renewable sources and are prepared to pay the necessary premiums for this, then what's the problem? There isn't one. Except there is: there are people who want their (and others') electricity to be produced by renewable sources but who demand that their premiums be forcibly subsidized by other people. That's the problem. It's not an economics problem, it's an ethics problem.

"However, oil will one day dry up; coal poses a serious carbon emissions problem and nuclear energy — as a proportion of our energy mix — will have to be diminished given the direction that public opinion has taken since last year’s nuclear disaster in Japan."

Oil will one day dry up, yet nobody seems to know when exactly - the "peak oil" warning has been issued with urgency pretty much every day since 1973, and yet we still have loads of oil and nobody takes a reputation hit. Coal emits carbon dioxide, but this is only a problem if (a) you accept the "settled science" that Co2 emissions cause global temperatures to rise independently of other causes, and if (b) you accept that preventing a modest rise in future temperatures would be a net collective benefit. Nuclear energy should be abandoned... not because of any problem with it per se, but simply because lots of people have got it into their heads that they don't like it? What a splendid argument.

"Solar power is no longer the expensive source of energy that it once was."

Oh?

"As the technology continues to develop and markets expand, it is very possible that this cost will drop by another 50 percent and maybe even more over the next decade. By that time, solar power will be able to compete with “traditional” energy sources on equal terms."

Oh.

So actually... it still is a comparatively expensive source of energy, just slightly less expensive than it used to be. But still not competitive with fossil fuel sources. So nothing has changed.

"Another issue that is frequently brought up when discussing the development of renewable energy sources concerns the land needed for the construction of renewable energy farms."

Yes. I've mentioned this several times in the past myself; there is always the possibility that, to reduce costs, the government will simply "expropriate" (i.e. steal) the requisite land in order to build the windfarms or solar plants.

"On the flip side, solar and wind power are both clean sources of energy and as long as there is ample communication and accurate environmental impact assessments, the construction of such energy farms tapping into these renewable sources is unlikely to meet much public opposition...

...If proper plans could be made for obtaining the land alongside adequate compensation schemes, converting land into an energy resource would no longer simply be a dream."

"Adequate compensation schemes". The correct term is voluntary purchase or lease - if the windfarms and solar plants are considered a good deal by local land owners, then they will voluntarily agree to sell or lease their land and there will thus be no need for "adequate compensation schemes", unless Tong anticipates that, actually, there will be landowners who refuse to cooperate. In that case, the Energy Bureau can safely apply to have their lands "expropriated" without fear of having to endure any uncomfortable press because of course, the greenies don't really care about theft when it's done for something they agree with. What happens to the people who don't agree to sell or lease their land? Who cares? They're only individual human beings. 

"Late last year, the Bureau of Energy, under the Ministry of Economic Affairs, drew up a plan to develop 1 million roof-top solar panels and 1,000 sea and land-based wind power turbines."

A million rooftop solar panels - why the big, fat, round number? Without an indication of the scale of the panels, it tells us nothing. I wonder if it would even be enough to cover half the number of government buildings throughout the country? And a thousand "sea and land-based" wind turbines? What proportion of them would be built at sea is very important, as they will cost more to construct than the land-based turbines (necessarily so - for a start, their transmission cables will have to be laid under or along the sea-bed). It's also important to know the size of the turbines - are we talking small, 400 kW capacity turbines, or are we talking large, 7 MW capacity turbines - that makes a big difference. If the Energy Bureau were planning on the construction of a thousand, land-based 7 MW capacity turbines, then that would be serious; as I calculated in March last year, the Bureau would need to construct 2014 such turbines - assuming they would operate across the year at about 30% of their capacity - in order to generate enough electricity to replace Taiwan's three operating nuclear power stations.

"The bureau’s proposal has forecast that by 2030, renewable energy power generation could reach 12,500MW and account for more than 16 percent of Taiwan’s installed capacity. It would generate about 35.6 billion kWh per year, the approximate amount of energy used by 8.9 million households."

Let's check those figures: I'm not sure about "installed capacity", but according to the Energy Bureau's latest available figures (for 2010), total electricity production in Taiwan was 247 TW hours (up from 229.7 TW hours in 2009 - an increase in just one year of 8%), which would put his 35.6 billion kW hours (i.e. 35.6 TW hours) at about 14%, not 16%. But is that 35.6 TW hour figure any good? Well, there are 8766 hours in a year so at 100% efficiency, a 12.5 GW capacity generator would churn out 109, 575 GW hours per year (or 109.5 TW hours per year), of which that 35.6 TW hours would be just over 30%. That's about what I'd expect - the industry's standard assumption for wind turbine efficiency is 30%, although it is somewhat generous given that one of the conditions in play here is continuous operation over a year without time taken out for maintenance. Whether the 30% assumption is warranted for solar panels, I don't know. Of the 8766 hours in a year, approximately 18% (1,600 hours) in Taiwan will be direct sunlight (that figure however seems to be calculated for Taipei and will not be valid for all of Taiwan) and the best of the current solar panels have a conversion efficiency of around 20%, so there is some reason to be skeptical as to whether that 30% efficiency assumption is warranted for solar panels also. For these reasons alone then, I think it is fair to conclude that that 35.6 TW hour figure is likely to be somewhat inflated.

Even assuming the electricity production calculations are accurate though, the next step in Tong's argument involves a sleight of hand:

"If that [ - constructing renewables - ed] can be combined with energy saving through the provision of appropriate incentives to different groups, we would be able to reduce our energy dependence at an even faster pace, which would help reduce the impact of fuel and electricity price increases."

What about the costs of constructing renewable generators and the costs of energy cutbacks? The assumption is too simplistic: the recent electricity price increases - partly a result of rising oil prices in the Middle East - were of the 20% to 30% magnitude, yet that increase was a cumulative total after having been delayed for many years; where are Tong's estimates for electricity price increases as a result of direct subsidies to wind power generation or surplus purchase arrangements for solar panel operators? Remember, that 35.6 TW hour figure he uses, although very likely inflated, is not insignificant at approximately 14% of Taiwan's electricity production. And there are likely to be other costs associated with Tong's proposed "energy cutbacks" only some of which would bear on efficiency.

"In terms of energy savings, Minister of Economic Affairs Shih Yen-shiang (施顏祥) announced last month that the government would make NT$100 billion (US$3.37 billion) in loans available for companies wishing to invest in energy-saving equipment."

Great. So a company which wants to buy energy-saving equipment will no longer have to demonstrate its' economic value to a bank manager in order to secure a loan, they can just go to the Ministry of Economic Affairs for a handout. That isn't capitalism, that's socializing the cost of the risk and dumping it onto the general public who will have to pay either through taxes or through putting up with inflated funny money.

"I would further propose the establishment of a green energy credit guarantee fund that would underwrite bank loans to businesses or individuals who have elected to install energy saving equipment or are seeking energy saving services. That would mean that banks would provide the capital, while the guarantee fund would carry all the risk. Since the banks carry no risk whatsoever, the government would be able to negotiate significantly lower interest rate loans."

Great. Another scheme to let the bankers get rich out of loaning out funds for which they have no responsibility. This is yet another example of the failure to recognize the importance of ethics to economics; all Tong is proposing to do is take the costs associated with the investment risks these companies will take in purchasing energy-saving equipment, and dump them on the general public via the State.

"There are currently such funds in operation in other countries that could serve as a reference for the practical operation and management of such a fund."

There's nothing for a Taiwanese like validating his proposals by pointing to what the foreigners are doing in their countries. It is just another variation on the argument from authority which is impressed upon them from elementary school onwards.

"There is no reason why Taiwan, which is relying on energy imports to match 99 percent of its energy consumption need, should not hurry to catch up with these countries by developing renewable energy and improving its current situation."

There are plenty of reasons for not hurrying to catch up using the methods Tong prescribes - the foremost among which is the ethical argument for not stealing from everyone else in order to pursue ends that only some people agree with.

However, the imperative importance attached to energy independence is I think misguided; although importing fuel has its costs, including the fact that the economy would quickly be crippled in the event of an extended naval blockade by the PLAN, I think it is easy to place too much emphasis on this - firstly because, even with energy independence, a naval blockade would quickly cripple the economy anyway by preventing exports of electronics and chemicals and preventing imports of wheat and soybean. Whereas energy independence makes sense for a country like the U.S. which has its own natural abundance of energy sources, this is not true in a little island like Taiwan. Energy independence for Taiwan could be a dangerous first step on the way toward economic autarky.