Columnists: Hans Nilsson, Fourfact

Published on: 20 Jan 2015

In search of a magic wand: The Economist on energy and technology

Nowadays we are told not to rely too much on the “best-before-day” labelling on food. Instead we should smell and taste and based upon these experiences judge whether to eat it or not. Food could last long after the label or be rejected before. In the latter case very much depends on how it has been treated in the delivery chain.

This knowledge should also be applied to news media, which becomes obvious when reading the special report on Energy and Technology in the latest issue of The Economist (January 17-23 2015). You don’t believe me? Well try for yourself!

The packaging looks good. There is even an article on the invisible fuel – energy efficiency – and that does not happen often in these kinds of reports. But wait a minute! They write: ‘ “The “fifth fuel”, as energy efficiency is sometimes called, is the cheapest of all.

This is odd. Yes we used to speak about the “fifth fuel” but stopped some two years ago when the IEA renamed Energy Efficiency  “The First Fuel” because of its low cost and abundant potential (see IEA Energy Efficiency Market Report, 2013). Where has The Economist been since then? They refer to IEA Publications frequently but apparently have missed a few.

In one article they mention “Demand Response” (DR) as if it was recently invented. We learn about: “ breakthroughs in storage are creating (other) options” and “.….a  company sells a device which makes ice at night with cheap electricity (and in cooler temperatures) then uses it to cool air in the daytime, saving energy and money ”. Can it be true? How ingenious! Except wait: ice storage applications have actually been around since the last century first as part of building renovations and later as part of DR-programs.

We read on that: “On current form the emissions from oil, gas and coal would, on most models, make it impossible to keep the rise in global temperatures below 2˚C by the year 2100; the most likely outcome would be a 4˚C rise, which has prompted calls for most of the world’s remaining hydrocarbons to be left in the ground.” And in another place “ There is no shortage of hydrocarbons in the Earth’s crust, and no sign that mankind is about to reach “peak technology”…”

From this read it looks as if the author attributes the mitigation of global warming to a minority opinion that is only voiced by activists. However, several other economists have said that most fossil fuels are “unburnable” due to their climate changing potential and associated costs and therefore represent zero-value in their owners’ books. Would that not be a more valid starting point for a paper with the name “Economist” than the lamenting “… the fall (in oil prices) has created turmoil in financial markets as energy companies lay off workers and cut or delay investment projects ”? Economists seem already to have good reasons to explain these “turmoils” and eternal delays from their vantage point.

Among the zanier notions in the report is when they praise the fact that renewable energy prices are falling but completely miss the role of government schemes to prompt the market learning process that makes performance better and prices lower. Instead they rely on a preferred expert who says: “ ..subsidies for primitive green technology, such as the current generation of solar panels, have been a ‘colossal mistake’. It would have been much better … to invest in proven technologies such as electrical interconnectors (linking Britain and Norway, for example)”.

The Economist probably regards all sorts of government interventions as “subsidies” and is not able to distinguish real subsidies apart from “learning investments” that feed market learning (see a very readable IEA Publication exactly on this topic called “Experience Curves for Energy Technology Policy”).

Since they haven’t read it the only remaining explanation for how and why markets develop must be a good magic wand.

Read: Let there be light


Other columns by Hans Nilsson