How Renewable Energy Models Can Produce Misleading Indications

The energy needs of the world’s economy seem to be easy to model. Energy consumption is measured in a variety of different ways including kilowatt hours, barrels of oil equivalent, British thermal units, kilocalories and joules. Two types of energy are equivalent if they produce the same number of units of energy, right?

For example, xkcd’s modeler Randall Munroe explains the benefit of renewable energy in the video below. He tells us that based on his model, solar, if scaled up to ridiculous levels, can provide enough renewable energy for ourselves and a half-dozen of our neighbors. Wind, if scaled up to absurd levels, can provide enough renewable energy for ourselves and a dozen of our neighbors.

There is a major catch to this analysis, however. The kinds of energy produced by wind and solar are not the kinds of energy that the economy needs. Wind and solar produce intermittent electricity available only at specific times and places. What the world economy needs is a variety of different energy types that match the energy requirements of the many devices in place in the world today. This energy needs to be transported to the right place and saved for the right time of day and the right time of year. There may even be a need to store this energy from year to year, because of possible droughts.

I think of the situation as being analogous to researchers deciding that it would be helpful or more efficient if humans could change their diets to 100% grass in the next 20 years. Grass is a form of energy product, but it is not the energy product that humans normally consume. It doesn’t seem to be toxic to humans in small quantities. It seems to grow quite well. Switching to the use of grass for food would seem to be beneficial from a CO2 perspective. The fact that humans have not evolved to eat grass is similar to the fact that the manufacturing and transport sectors of today’s economy have not developed around the use of intermittent electricity from wind and solar.

Substituting Grass for Food Might “Work,” but It Would Require Whole New Systems 

If we consider other species, we find that animals with four stomachs can, in fact, live quite well on a diet of grass. These animals often have teeth that grow continuously because the silica in grass tends to wear down their teeth. If we could just get around these little details, we might be able to make the change. We would probably need to grow extra stomachs and add continuously growing teeth. Other adjustments might also be needed, such as a smaller brain. This would especially be the case if a grass-only diet is inadequate to support today’s brain growth and activity.

The problem with nearly all energy analyses today is that they use narrow boundaries. They look at only a small piece of the problem–generally the cost (or “energy cost”) of the devices themselves–and assume that this is the only cost involved in a change. In fact, researchers need to recognize that whole new systems may be required, analogous to the extra stomachs and ever-growing teeth. The issue is sometimes described as the need to have “wide boundaries” in analyses.

If the xkcd analysis netted out the indirect energy costs of the system, including energy related to all of the newly required systems, the results of the analysis would likely change considerably. The combined ability of wind and solar to power both one’s own home and those of a dozen and a half neighbors would likely disappear. Way too much of the output of the renewable system would be used to make the equivalent of extra stomachs and ever-growing teeth for the system to work. The world economy might not work as in the past, either, if the equivalent of the brain needs to be smaller.

Is “Energy Used by a Dozen of Our Neighbors” a Proper Metric?

Before I continue with my analysis of what goes wrong in modeling intermittent renewable energy, let me say a few words about the way Munroe quantifies the outcome of his energy analysis. He talks about “energy consumed by a household and a dozen of its neighbors.” We often hear news items about how many households can be served by a new electricity provider or how many households have been taken offline by a storm. The metric used by Munroe is similar. But, does it tell us what we need to know in this case?

Our economy requires energy consumption by many types of users, including governments to make roads and schools, farmers to plant crops and manufacturers to make devices of all kinds. Leaving non-residential energy consumption out of the calculation doesn’t make much sense. (Actually, we are not quite certain what Munroe has included in his calculation. His wording suggests that he included only residential energy consumption.) In the US, my analysis indicates that residential users consume only about a third of total energy.1 The rest is consumed by businesses and governments.

If we want to adjust Munroe’s indications to include energy consumed by businesses and governments, we need to divide the indicated number of residential households provided with energy by about three. Thus, instead of the units being “Energy Consumed by a Dozen of Our Neighbors,” the units would be “Energy Consumed by Four of Our Neighbors, Including Associated Energy Use by Governments and Businesses.” The apparently huge benefit provided by wind and solar becomes much smaller when we divide by three, even before any other adjustments are made.

What Might the Indirect Costs of Wind and Solar Be? 

There are a number of indirect costs:

(1) Transmission costs are much higher than those of other types of electricity, but they are not charged back to wind and solar in most studies.

A 2014 study by the International Energy Agency indicates that transmission costs for wind are approximately three times the cost of transmission costs for coal or nuclear. The amount of excess costs tends to increase as intermittent renewables become a larger share of the total. Some of the reason for higher transmission costs for both wind and solar are the following:

(a) Disproportionately more lines need to be built for wind and solar because transmission lines need to be scaled to the maximum output, rather than the average output. Wind output is typically available 25% to 35% of the time; solar is typically available 10% to 25% of the time.

(b) There tend to be longer distances between where renewable energy is captured and where it is consumed, compared to traditional generation.

(c) Renewable electricity is not created in a fossil fuel power plant, with the same controls over the many aspects of grid electricity. The transmission system must therefore make corrections which would not be needed for other types of electricity.

(2) With increased long distance electricity transmission, there is a need for increased maintenance of transmission lines. If this is not performed adequately, fires are likely, especially in dry, windy areas.

There is recent evidence that inadequate maintenance of transmission lines is a major fire hazard.

In California, inadequate electricity line maintenance has led to the bankruptcy of the Northern California utility PG&E. In recent weeks, PG&E has initiated two preventative cut-offs of power, one affecting as many as two million individuals.

The Texas Wildfire Mitigation Project reports, “Power lines have caused more than 4,000 wildfires in Texas in the past three and a half years.”

Venezuela has a long distance transmission line from its major hydroelectric plant to Caracas. One of the outages experienced in that country seems to be related to fires close to this transmission line.

There are things that can be done to prevent these fires, such as burying the lines underground. Even using insulated wire, instead of ordinary transmission wire, seems to help. But any solution has a cost involved. These costs need to be recognized in modeling the indirect cost of adding a huge amount of renewables.

(3) A huge investment in charging stations will be needed, if anyone other than the very wealthy are to use electric vehicles.

Clearly, the wealthy can afford electric vehicles. They generally have garages with connections to electrical power. With this arrangement, they can easily charge a vehicle that is powered by electricity when it is convenient.

The catch is that the less wealthy often do not have similar opportunities for charging electric vehicles. They also cannot afford to spend hours waiting for their vehicles to charge. They will need inexpensive rapid-charging stations, located in many, many places, if electric vehicles are to be a suitable choice. The cost of rapid-charging will likely need to include a fee for road maintenance, since this is one of the costs that today is included in fuel prices.

(4) Intermittency adds a very substantial layer of costs. 

A common belief is that intermittency can be handled by rather small changes, such as time-of-day pricing, smart grids and cutting off power to a few selected industrial customers if there isn’t enough electricity to go around. This belief is more or less true if the system is basically a fossil fuel and nuclear system, with a small percentage of renewables. The situation changes as more intermittent renewables are added.

Once more than a small percentage of solar is added to the electric grid, batteries are needed to smooth out the rapid transition that occurs at the end of the day when workers are returning home and would like to eat their dinners, even though the sun has set. There are also problems with electricity from wind cutting off during storms; batteries can help smooth out these transitions.

There are also longer-term problems. Major storms can disrupt electricity for several days, at any time of the year. For this reason, if a system is to run on renewables alone, it would be desirable to have battery backup for at least three days. In the short video below, Bill Gates expresses dismay at the idea of trying to provide a three-day battery backup for the quantity of electricity used by the city of Tokyo.

We do not at this point have nearly enough batteries to provide a three-day battery backup for the world’s electricity supply. If the world economy is to run on renewables, electricity consumption would need to rise from today’s level, making it even more difficult to store a three-day supply.

A much more difficult problem than three-day storage of electricity is the need for seasonal storage, if renewable energy is to be used to any significant extent. Figure 1 shows the seasonal pattern of energy consumption in the United States.

Figure 1. US energy consumption by month of year, based on data of the US Energy Information Administration. “All Other” is total energy, less electricity and transportation energy. It includes natural gas used for home heating. It also includes oil products used for farming, as well as fossil fuels of all kinds used for industrial purposes.

In contrast with this pattern, the production of solar energy tends to peak in June; it falls to a low level in December to February. Hydroelectric power tends to peak in spring, but its quantity is often quite variable from year to year. Wind power is quite variable, both from year to year and month to month.

Our economy cannot handle many starts and stops of electricity supply. For example, temperatures need to stay high for melting metals. Elevators should not stop between floors when the electricity stops. Refrigeration needs to continue when fresh meat is being kept cold.

There are two approaches that can be used to work around seasonal energy problems:

  1. Greatly overbuild the renewables-based energy system, to provide enough electricity when total energy is most needed, which tends to be in winter.
  2. Add a huge amount of storage, such as battery storage, to store electricity for months or even years, to mitigate the intermittency.

Either of these approaches is extremely high cost. These costs are like adding extra stomachs to the human system. They have not been included in any model to date, as far as I know. The cost of one of these approaches needs to be included in any model analyzing the costs and benefits of renewables, if there is any intention of using renewables as more than a tiny share of total energy consumption.

Figure 2 illustrates the high energy cost that can occur by adding substantial battery backup to an electrical system. In this example, the “net energy” that the system provides is essentially eliminated by the battery backup. In this analysis, Energy Return on Energy Invested (EROEI) compares energy output to energy input. It is one of many metrics used to estimate whether a device is providing adequate energy output to justify the front-end energy inputs.

Figure 2. Graham Palmer’s chart of Dynamic Energy Returned on Energy Invested from “Energy in Australia.”

The example in Figure 2 is based on the electricity usage pattern in Melbourne, Australia, which has a relatively mild climate. The example uses a combination of solar panels, batteries and diesel backup generation. Solar panels and backup batteries provide electricity for the 95% of annual electricity usage that is easiest to cover with these devices; diesel generation is used for the remaining 5%.

The Figure 2 example could be adjusted to be “renewable only” by adding significantly more batteries, a large number of solar panels, or some combination of these. These additional batteries and solar panels would be very lightly used, bringing the EROEI of the system down to an even lower level.

To date, a major reason that the electricity system has been able to avoid the costs of overbuilding or of adding major battery backup is the small share they represent of electricity production. In 2018, wind amounted to 5% of world electricity; solar amounted to 2%. As percentages of world energy supply, they represented 2% and 1% respectively.

A second reason that the electricity system has been able to avoid addressing the intermittency issue is because backup electricity providers (coal, natural gas, and nuclear) have been forced to provide backup services without adequate compensation for the value of services that they are providing. The way that this happens is by giving wind and solar the subsidy of “going first.” This practice creates a problem because backup providers have substantial fixed costs, and they often are not being adequately compensated for these fixed costs.

If there is any plan to cease using fossil fuels, all of these backup electricity providers, including nuclear, will disappear. (Nuclear also depends on fossil fuels.) Renewables will need to stand on their own. This is when the intermittency problem will become overwhelming. Fossil fuels can be stored relatively inexpensively; electricity storage costs are huge. They include both the cost of the storage system and the loss of energy that takes place when storage is used.

In fact, the underfunding issue associated with allowing intermittent renewables to go first is already becoming an overwhelming problem in a few places. Ohio has recently chosen to provide subsidies to coal and nuclear providers as a way of working around this issue. Ohio is also reducing funding for renewables.

 (5) The cost of recycling wind turbines, solar panels, and batteries needs to be reflected in cost estimates. 

A common assumption in energy analyses seems to be that somehow, at the end of the design lifetime of wind turbines, solar panels and batteries, all of these devices will somehow disappear at no cost. If recycling is done, the assumption is made that the cost of recycling will be less than the value of the materials made available from the recycling.

We are discovering now that recycling isn’t free. Very often, the energy cost of recycling materials is greater than the energy used in mining them fresh. This problem needs to be considered in analyzing the real cost of renewables.

 (6) Renewables don’t directly substitute for many of the devices/processes we have today. This could lead to a major step-down in how the economy operates and a much longer transition. 

There is a long list of things that renewables don’t substitute for. Today, we cannot make wind turbines, solar panels, or today’s hydroelectric dams without fossil fuels. This, by itself, makes it clear that the fossil fuel system will need to be maintained for at least the next twenty years.

There are many other things that we cannot make with renewables alone. Steel, fertilizer, cement and plastics are some examples that Bill Gates mentions in his video above. Asphalt and many of today’s drugs are other examples of goods that cannot be made with renewables alone. We would need to change how we live without these goods. We could not pave roads (except with stone) or build many of today’s buildings with renewables alone.

It seems likely that manufacturers would try to substitute wood for fossil fuels, but the quantity of wood available would be far too low for this purpose. The world would encounter deforestation issues within a few years.

(7) It is likely that the transition to renewables will take 50 or more years. During this time, wind and solar will act more like add-ons to the fossil fuel system than they will act like substitutes for it. This also increases costs.

In order for the fossil fuel industries to continue, a large share of their costs will need to continue. The people working in fossil fuel industries need to be paid year around, not just when electrical utilities need backup electrical power. Fossil fuels will need pipelines, refineries and trained people. Companies using fossil fuels will need to pay their debts related to existing facilities. If natural gas is used as backup for renewables, it will need reservoirs to hold natural gas for winter, besides pipelines. Even if natural gas usage is reduced by, say, 90%, its costs are likely to fall by a much smaller percentage, say 30%, because a large share of costs are fixed.

One reason that a very long transition will be needed is because there is not even a path to transition away from fossil fuels in many cases. If a change is to be made, inventions to facilitate these changes are a prerequisite. Then these inventions need to be tested in actual situations. Next, new factories are needed to make the new devices. It is likely that some way will be needed to pay existing owners for the loss of value of their existing fossil fuel powered devices; if not, there are likely to be huge debt defaults. It is only after all of these steps have taken place that the transition can actually take place.


These indirect costs lead to a huge question mark regarding whether it even makes sense to encourage the widespread use of wind and solar. Renewables can reduce CO2 emissions if they really substitute for fossil fuels in making electricity. If they are mostly high cost add-ons to the system, there is a real question: Does it even make sense to mandate a transition to wind and solar?

Do Wind and Solar Really Offer a Longer-Term Future than Fossil Fuels?

At the end of the xkcd video shown above, Munroe makes the observation that wind and solar are available indefinitely, but fossil fuel supplies are quite limited.

I agree with Munroe that fossil fuel supplies are quite limited. This occurs because energy prices do not rise high enough for us to extract very much of them. The prices of finished products made with fossil fuels need to be low enough for customers to be able to afford them. If this is not the case, purchases of discretionary goods (for example cars and smart phones) will fall. Since cars and smart phones are made with commodities, including fossil fuels, the lower “demand” for these finished goods will lead to falling prices of commodities, including oil. In fact, we seem to have experienced falling oil prices most of the time since 2008.

Figure 3. Inflation adjusted weekly average Brent Oil price, based on EIA oil spot prices and US CPI-urban inflation.

It is hard to see why renewables would last any longer than fossil fuels. If their unsubsidized cost is any higher than fossil fuels, this would be one strike against them. They are also very dependent on fossil fuels for making spare parts and for repairing transmission lines.

It is interesting that climate change modelers seem to be convinced that very high amounts of fossil fuels can be extracted in the future. The question of how much fossil fuels can really be extracted is another modeling issue that needs to be examined closely. The amount of future extraction seems to be highly dependent on how well the current economic system holds together, including the extent of globalization. Without globalization, fossil fuel extraction seems likely to decline quickly.

Do We Have Too Much Faith in Models? 

The idea of using renewables certainly sounds appealing, but the name is deceiving. Most renewables, except for wood and dung, aren’t very renewable. In fact, they depend on fossil fuels.

The whole issue of whether wind and solar are worthwhile needs to be carefully analyzed. The usual hallmark of an energy product that is of substantial benefit to the economy is that its production tends to be very profitable. With these high profits, governments can tax the owners heavily. Thus, the profits can be used to aid the rest of the economy. This is one of the physical manifestations of the “net energy” that the energy product provides.

If wind and solar were really providing substantial net energy, they would not need subsidies, not even the subsidy of going first. They would be casting off profits to benefit the rest of the economy. Perhaps renewables aren’t as beneficial as many people think they are. Perhaps researchers have put too much faith in distorted models.

Note:

[1] This is my estimate, based on EIA and BP data. With respect to electricity, EIA data shows that in the US, residential users consume about 38% of the total. With respect to fuels that are not used for transportation and not used for electricity, US residential users consume about 19% of these fuels. Combining these two categories, US households use about 31% of non-transportation fuels.

With respect to transportation fuels, the closest approximation we can get is by looking at petroleum use, divided between gasoline and other products. According to BP data, on a worldwide basis, 26% of petroleum is burned as gasoline. In the United States, about 46% of petroleum consumption is burned as gasoline. Of course, some of this gasoline usage is for non-residential use. For example, cars used by police and sales representatives are typically powered by gasoline, as are small trucks used by businesses.

Furthermore, the US is a major importer of manufactured goods from China and other parts of the world. The embodied energy in these imported goods never gets into US energy consumption statistics. In theory, we should add a little energy consumption by foreign manufacturers to supplement total reported US energy consumption.

The selection of “about a third” is based on these considerations.

 

 

 

 

 

 

 

 

 

1,605 thoughts on “How Renewable Energy Models Can Produce Misleading Indications

  1. Transportation is a big energy gobblers….I lived in Boston for 17 years and can vouch for it’s stellar mass transit system. Not having to make use of a car for most of that time while living there.
    On the other side of the spectrum, Charlotte had a hard bones bus system and built a light rail along South Blvd with expansion plans on the books. Now back here in South Florida and it is very sparse bus system, a trip rail system that serves 3 cities West Palm Beach, Ft Lauderdale and Miami with numerous stops and the same for a high speed rail that recently opened for service for the same cities. To be honest, one NEEDS a car in Charlotte or South Florida to commute for work.
    Noticed this article on the net,

    The U.S. cities with the best and worst transportation
    Adriana BelmonteAssociate Editor
    Yahoo FinanceNovember 4, 2019, 2:06 PM EST
    https://finance.yahoo.com/news/transportation-infrastructure-usa-190648796.html
    Infrastructure is the foundation to both economic growth and opportunity’
    According to Value Penguin, Washington D.C., San Francisco, and Boston are the biggest metros with the cheapest public transit rates. On the other end of the spectrum, the most expensive are Los Angeles, Miami, New York, and Philadelphia.

    Philadelphia not only has some of the highest annual ticket prices for public transport relative to median household income, but it also has one of the highest average ages of public transit fleet.

    Yet most of the cities deemed to have the worst transportation are in lesser populated areas of the country. Why?
    “You see a lot of places that have more sprawl have a greater reliance on cars in general,” Kane said. “You haven’t seen as much investment in transit or in some of these other multi-modal infrastructure options. If these places aren’t making plans and aren’t making investments in transit, is it any surprise that people aren’t going to rely as much on those systems

    “Ideally, infrastructure is the foundation to both economic growth and opportunity,” Kane said. “Unfortunately, in many places, we look at a lot of this from an engineering perspective of channeling money into the same types of projects, not having enough money to put into projects, and not really looking at the economic right of these projects.”

    Happy Infrastructure Week
    President Donald Trump pledged to make infrastructure a top priority of his presidency. Back in April 2019, he reached a $2 trillion deal with Democrats to upgrade the country’s highways, railroads, bridges, and broadbands.
    So, what do they do….???
    But Infrastructure Week seemingly came to a halt after Trump grew angry at House Democrats for their investigation into him regarding his finances and Robert Mueller

    One thing about Boston Metro, still a traffic NIGHTMARE and congested. That why they undertook the mega project coined The BIG DIG, later renamed the BIG PIG, due to the astonishing escalating cost, first estimated at $2 Billion and the final bill, if I remember correctly, +12 Billion dollars!
    Much was cut out to achieve that too!

    • Public transportation seems to need big subsidies. As cities become poorer, they have less funds to put toward these projects. This is part of the problem keeping the systems in good repair.

      • Let us not forget the big subsidies to have the privilege to ride private automobiles?
        Highways Paved With Gold
        You think the government is wasting a few billion a year on mass-transit subsidies. But what about the huge subsidies for cars and trucks?
        By DANIEL GROSS
        https://slate.com/business/2008/07/you-think-the-government-is-wasting-a-few-billion-a-year-on-mass-transit-subsidies-but-what-about-the-huge-subsidies-for-cars-and-trucks.html
        and another
        View at Medium.com
        But, I suppose, it all depends on how on looks at the topic.

        • A good point, Happy. But one difference: the subsidies for motor cars are largely paid for by petrol taxes; that is, by the drivers themselves. The subsidies for trucks, on the other hand, are paid by society. I well remember, driving in Pennsylvania, how bad the roads were, because they were designed for 10 ton trucks, and were being used by 40 to trucks, that did 250 times as much damage. (The damage is proportional to the fourth power of the weight of the vehicle)

          Charge the trucks a tax proportional to the damage they cause, which works out at $250,000 per 40 ton truck per annum, and freight rail begins to look like a bargain.

    • An excellent article on the Big Dig:

      https://www.city-journal.org/html/lessons-boston’s-big-dig-13049.html

      When I lived in the US, in nearby Pennsylvania, it was a standing joke (as of course was much Pa infrastructure at the time). But it was inevitable. Something had to replace the Central Artery, which had destroyed much of historic Boston for the benefit only of people driving through the city. And that something had to be far more friendly to the urban environment.

      In retrospect, it was a good idea in principle; gross city mismanagement, and the exclusive use of union labour, were together responsible for most of the piggishness. But the history does show that the Greeks were right strictly to limit the size of their cities.

  2. There’s never going to be a revolution that topples the current power structure. It will ride all the way down the slide. For the simple reason that there’s never before been a power structure that had all of the forces of technological society on it’s side, and was unified across the globe (neoliberal, neofascist combined government/corporate power through the debt currency system).
    Control of the masses has never been easier, which is a bit paradoxical since the masses themselves have never been more numerical. But still, it’s true. Remember, they can do anything they want. They can literally shut down the atm’s and your bank accounts, while filling their own accounts with unlimited money from the central bank. All the while paying good money for security forces complete with every array of modern armaments to defend themselves.
    Work for them or die, those are the two options of everybody reading this post.

    • We have put together all kinds of things that are subject to hacking. We now have a smart grid. Every government agency has lots of computers. Even automobiles are getting more computer controls. If any of these go wrong, we have big trouble.

      There are a huge number of government promises which likely cannot be met. Guarantees on pensions. Social Security and Medicare. Insurance on bank balances, if there are huge financial problems.

      It may be that citizens will not need to revolt. The centralized system may wither up and die. Federal programs may be pushed out to the states in the US. The EU may disappear. The United Nations may disappear. Big companies will voluntarily disband because international trade becomes fragmented.

      We really don’t understand how things will work out, going forward.

    • Dolph, that is an alarming but alas most realistic assessment: thank you.

      But perhaps there is one scintilla of hope. You write: “All the while paying good money for security forces complete with every array of modern armaments to defend themselves.”

      This is perhaps the flaw in their plan. One lesson that tyrants and oligarchs throughout history have failed to learn is this. Sooner or later, their security forces are faced with an existential choice: protect their boss, or protect their families. And then the sword is victorious over the money, as Oswald Spengler prophesied in 1922.

    • The Revolution in the advanced economies will be a process, not a dramatic event: after 10 years, you wake up to find everything has changed radically.

      And not to your advantage, on the whole.

      Becoming a valuable tool for the very rich has much to recommend it in the short -to -medium term.

    • Working for them is right. I was a solo plaintiffs attorney for the last dozen years. It was a grind, and the cards are stacked in favor of the (insurance) corporations. Finally wised up, took an in house defense job. I’m busy, but I have corporate resources behind me, and the pay is substantially better. If you can’t beat ’em, join ’em. The extra dough I’m making will enable me to buy a pretty sweet bugout location in the next year or two, if BAU holds together…….

  3. More on the global auto slump:

    “As the global economy faces its sharpest slowdown since the financial crisis, one industry is both culprit and victim.

    “The motor industry affects the health of the global economy far more than its share of total output would suggest: carmakers have long supply chains to source parts; they are also big consumers of raw materials and chemicals, textiles and electronics; and their fortunes affect millions of service sector jobs in sales, repairs and maintenance.

    “Last year the sector shrank for the first time since the global crisis. The IMF believes this fall in output accounted for more than a quarter of the slowdown in the global economy between 2017 and 2018. The sector may also be responsible for up to a third of the slowdown in global trade growth between 2017 and 2018, the fund said last month, after factoring in the spillover effects on trade in car parts and other intermediate goods…

    “Research published by Fitch Ratings earlier this year argued that this global fall in car sales could have reduced world gross domestic product by as much as 0.2 per cent — significantly more than the IMF estimates — after taking account of spillovers to other industries and the effects of lower wages and profits on household and business spending.

    “Much of the downturn elsewhere appears to be cyclical: the decline followed several years of surging sales, and it came just as many carmakers were being forced to make large investments to develop electric vehicles that will be lossmaking in the near term at least. But pervasive uncertainty over trade — and the resulting worries over global growth — do not help.

    “As Holger Schmieding, an economist at Berenberg, pointed out, this kind of uncertainty tends to scare consumers off big ticket purchases: “If you are uncertain . . . you don’t have to buy the car.””

    https://www.ft.com/content/cd2f8bdc-fef6-11e9-be59-e49b2a136b8d

    • Christine Lagarde and her ilk should contemplate that: ‘uncertainty’ (realism?) is fateful in the fantasy economy, which has been built on encouraging people to consume without reflecting.

      Stagnation of wages, threats of likely wealth taxes, taxes on even modest inheritances, potential loss of savings on top of the steady erosion of the last decade, the looming instability of pension schemes, all combine to put a break on consumption among those who actually think ahead (not all consumers, it’s true).

      It can’t help that cars seem to last appreciably longer these days: perhaps quality needs to plunge to force new purchases, as with most domestic appliances now?

      • A friend paraphrased Lagarde’s jaw-dropping comment (“We should be happier to have a job than to have our savings protected,”), as, “It’s ok to steal from me everything I’ve worked for as long as I can continue being your slave,” which gave me a rueful chuckle.

        Hardly surprising that the world is being roiled by protests when the elites are apparently so out of touch with reality.

        • Economic theory, with the emphasis on income streams alone, is out of touch with emotional and psychological reality, too.

          For thousands of years, we relied on stores of grains, fruit, preserved meats and fish to survive, and if you lacked them, you died. Even herds of horses were a kind of store to those who lived off them, as well as transport. The psychological importance of savings cannot be over-estimated, it has been fixed in us by the experience of millennia.

          Destroy savings, and the possibility of ever accumulating more than an inadequate amount, and the threat is felt to be existential: resulting only in at first panic, then a loss of faith, and perhaps the will to live (above all when you have known an earlier, apparently more secure state).

          The next step, just before the last-stage collapse, may be a kind of Totalitarian Communism, dressed up as ‘free market Capitalism’, presided over by the likes of Lagarde – who will tell us like Macron, that we’ve ‘got it good and have no right to complain.’

          Macron and Lagarde’s comments show us just how these people reason, and how they regard us.

          We will be left to exchange darkly ironic jokes about it all, just like those who lived in the old Soviet bloc. Nihilism and hedonism – if you lack a religious faith – will be the only viable philosophies to make it through the day.

          • the stores of grains and meats have always been stores of energy against future shortages, between harvests etc

            my savings pot, such as it is, is an imagined call on future energy—ie, I don’t need to keep food in my cellar because I think my savings/pension will buy that food at some future time. I dont need to worry about future harvests.

            One can only live in hope!!

            Possibly what Lagarde meant, was that have a cash producing job was a better bet that having interest producing savings, which in the long term will diminish

            Whether she was right or not is debatable I guess

            • It will be all we have left, certainly! The logic of the decline is that all savings and pensions will be destroyed, inexorably.

              But her error is in stating this so openly just now, and blithely assuming that it will go down well.

              She should be trying to maintain the fantasy, and has pulled the curtain aside too soon.

              However, the mass of people are perhaps so distracted and unobservant that it will go unnoticed and uncomprehended.

              History shows, though, that people will accept the most hopeless and miserable life if they can fill their stomachs one more day, the will to merely exist is so strong. Just add some alcohol, drugs, sex and it will still seem worth it. They won’t need to be fooled, simply because they won’t be thinking much at all.

          • In some parts of Africa, I understand wealth is kept in the form of herds of cattle. A continuation of past practices.

            In China, the tendency has been to try to keep wealth in the form of extra apartments. As far as I know it doesn’t have a property tax, so these apartments are generally not rented out. The hope is that asset prices will keep up with or exceed inflation. A March 19, 2019 article says,

            China has considered a property tax for more than a decade, with market speculation of its implementation rearing its head every few years.

            But the idea of a tax has run into resistance, with stakeholders fearing it would erode property values, trigger a sell-off in the market, or cause a correction resulting in systemic risks.

            Work on a draft property tax in China is “steadily advancing”, senior Chinese parliamentary officials said last week during the country’s annual parliament meeting.

            Adding such a tax would likely bring down the China housing debt bubble and eliminate the value of this type of savings. But if China needs more tax revenue, this would be an idea that could be implemented, perhaps on a city by city basis.

            • “In some parts of Africa, I understand wealth is kept in the form of herds of cattle. ”

              Indeed it is: I have seen it. This is especially true of the nomadic tribes of sub Saharan Africa, who move with their cattle. At least, the richer ones; the poorer ones move with their goats. These are rather more valuable than gold or rented apartments, which provide neither milk nor meat.

              Before the White Man and his Burden, they evolved a good modus operandi with the settled tribes: they were allowed free transit and the right to abide, as necessary, for one season only. They paid for this by labour or sometimes trade goods acquired in transit. Their enemy was not the local people, but the nobles who believed in land grants, or the colonial civil servants who believed in bureaucracy.

              As long as the population, of both people and animals, remained stable, it was sustainable. Until imported Western agriculture destroyed that balance. We tend to forget how recent these events were. Lord Lugard became Governor of Nigeria in 1912, but three years previously, Haber had discovered how to synthesise nitrogen fertiliser, and the downhill slope was ready and waiting.

            • Pretty much an instinct everywhere, at least until government come in with their promises of pensions and help for the unemployed and sick. When energy consumption per capita is growing and population is relatively young, they can often keep those promises. But it looks like it will become impossible as resource per capita become stretched and populations become older and sicker.

    • The biggest source of falling car sales in 2018 was China. The China falling auto sales situation has gotten worse in 2019. Furthermore, India and EU have also been experiencing falling automobile sales in 2019. The problem is not fixing itself.

      • From my (eccentric as usual) perspective, falling auto sales mean that the problem is indeed solving itself. And when the sales fall to zero, the problem will be solved, and we shall soon be rid of one of the most destructive inventions our hubris and folly have ever perpetrated.

        • Exactly! Limits to Growth is reached when industrial consumption starts falling. We seem to be at that point now. It is not just auto sales that are falling: it is smart phones. I expect steel consumption is down. Cement consumption seems to be down, according to Ugo Bardi. I haven’t seen data to support this, however. It is behind a pay wall.

          Limits to Growth comes when the population cannot afford the output of the industrial system. This is another description of collapse.

  4. “Many Americans are still recovering from the 2008 financial crisis. Almost everyone knows someone who lost a job, their retirement savings or even a home in its aftermath.

    “When the housing bubble burst and sent home prices plummeting, it set off a chain of defaults that snowballed into a recession. This cautionary tale of risky lending, ballooning debt and market speculation should be a clear warning of looming perils in the student loan industry.”

    https://www.cnbc.com/2019/11/04/we-should-all-be-concerned-about-the-student-debt-crisis.html

    • “The subprime mortgage-backed bond may be dead in America a decade after it helped trigger the global financial crisis, but a security with some of the same high-risk characteristics is starting to take off. It’s called the non-qualified mortgage — basically a loan granted to borrowers whose checkered financial record made them ineligible for conventional mortgages.

      “Lenders have bundled more than $18 billion worth of these loans into bonds this year.”

      https://www.bloombergquint.com/business/risky-mortgage-bonds-are-back-and-delinquencies-are-piling-up

      • “The leveraged loan market has doubled in size over the last ten years, overshadowing high-yield bonds as a source of financing for riskier businesses. With global growth slowing, and growth in the developed world widely acknowledged to have peaked, investors are beginning to pull back from the market. Many worry that the next recession could bring about a string of corporate defaults that hits these lenders hard.

        “Analysts at Bank of America Merrill Lynch recently wrote of the US leveraged loan market, “we are seeing numerous new signs of tightening credit conditions…ranging from wide market bifurcation, to a prevalence of downgrades, rising distress, lower availability of capital for the lowest rated names”.”

        https://reaction.life/crunching-the-credit-signals/

      • I suppose if it seemed to “work” before, it will be tried again. We have a huge number of places where risk is being added to the overall system.

  5. Honey, the kid keeps screaming give him the tablet and shit himmup!
    Too much screen time changes children’s brains, study from Cincinnati Children’s finds
    ANNE SAKER | CINCINNATI ENQUIRER | 16 hours ago
    Young children who get more screen time than doctors recommend have differences in parts of the brain that support language and self-regulation, a study at Cincinnati Children’s Hospital Medical Center has found.
    The study put 47 healthy Cincinnati-area children between 3 and 5 through magnetic resonance imaging of their brains as well as cognitive testing. While the study did not learn how screen time changed the brains, it did show that skills such as brain processing speed were affected
    A Canadian study published in April found that screen time can affect attention spans in preschoolers. A March study found that mobile phone use can delay expressive language in 18-month-olds. Another JAMA Pediatrics study in April found that screen time can affect how a child performs on developmental testing.
    The Cincinnati Children’s study assessed screen time using the recommendations of the American Academy of Pediatrics. The academy suggests, for example, that children younger than 18 months should avoid all screen media other than video chatting. Parents should monitor digital media and watch it with their children.

    For children between 2 to 5, the AAP recommends limiting screen time to an hour a day. Parents should designate media-free times, such as dinner or driving, as well as media-free locations at home, such as bedrooms.

    Just insert a computer chip in the kids brain and get it over with!

    https://amp.cincinnati.com/amp/4124393002

    • A person wonders what is happening to society as a whole, with people always connected to one device or another. What happens to critical thinking? What happens to conversation? What happens to relationships with children?

      I know that I make a point to talk to my daughter in Boston every week, usually on Sunday afternoons. So there can be good coming from these devices. It is mostly that we overuse them.

      • “It is mostly that we overuse them.”

        Near collapse, distracted by high tech. Sounds about right.

    • The old solution was a drop of gin. Model child guaranteed: how sweet they look when asleep…..

      • Prepare to be arrested for child abuse! But I agree: when our children were teething, we rubbed vermouth on the affected spot. It worked; it was traditional; and it was probably far healthier than chemically manufactured sedatives. Plus, of course, lots of hugs and words of comfort.

  6. “Factory activity across the euro zone contracted sharply last month… Worryingly for policymakers at the European Central Bank, who have restarted a 2.6 trillion euro (£2.3 trillion) bond-buying programme after cutting interest rates on deposits in September, the malaise appears to be spread across the region…

    “…struggles appear widespread and manufacturing activity in Germany, Europe’s largest economy, remained stuck in recession last month…”

    https://uk.reuters.com/article/uk-eurozone-economy-pmi/euro-zone-factories-stuck-in-a-slump-as-trade-war-still-biting-idUKKBN1XE0TV

  7. “China will face another potential financial crisis in 2020 when local governments must pay-off over $283 billion in maturing municipal debt…

    “…the annual cost of Chinese municipal bond debt maturities has ballooned from $34 billion in 2017; to $118 billion in 2018; $183 billion in 2019; and is expected to top $283 billion in 2020, according to Bloomberg.”

    https://www.theepochtimes.com/chinas-2020-crisis-283-billion-of-maturing-local-debt_3136522.html

  8. “At the end of any economic cycle, we often get warnings that appear to be unrelated,” strategist Joseph Zidle wrote in a recent note. “It’s in hindsight that we realize that they were not at all random.” Investors saw this during the runup and aftermath of the housing bubble, he added, and we’re seeing it now.

    “Among the recent troubles he thinks are connected are repo market woes, negative-yielding debt, global trade conflicts and collapsing manufacturing. And every cycle ends with excess.

    “The “mother of all bubbles” in the sovereign debt market, Zidle says, is the catalyst that will likely trigger the next recession. He expects that to happen between mid-2020 and the end of 2021.”

    https://www.marketwatch.com/story/the-mother-of-all-bubbles-could-blow-up-the-economy-if-profits-dont-improve-warns-blackstone-strategist-2019-11-04

  9. But, but, ITS ALL a PONZI scheme…Surprise🤗

    SCRANTON, Pa. (AP) — The fraudster called himself “King Perry,” and for a while he lived like royalty.
    Perry Santillo masterminded a long-running investment scam that collected more than $115 million from 1,000 investors around the country, using some of the proceeds to fund a lavish lifestyle of cars, casino junkets and houses in multiple states, according to federal securities regulators.
    At one point, Santillo threw himself a party at a Las Vegas club and had a song written for the occasion — the lyrics of which boasted that “King Perry” wears a “$10,000 suit everywhere he rides,” the Securities and Exchange Commission said in a complaint.
    The Ponzi scheme eventually collapsed, and Santillo, of Rochester, New York, is likely to trade his fancy duds for prison attire when he is sentenced on criminal conspiracy and fraud charges.
    Santillo appeared Monday in federal court in Scranton, Pennsylvania, to plead guilty to a federal fraud charge, having already entered a guilty plea last month to similar charges in Rochester, New York. Each charge carries a maximum 20-year prison sentence.
    Prosecutors say Santillo’s victims include elderly people who lost their life savings

    https://finance.yahoo.com/news/sec-king-perry-used-ponzi-060748617.html

    The Big Boys won’t see a day in jail and get richer….

    • Gee, how stupid to entrust ones life savings to a King Perry. Far more sensible to entrust them to a 128 year old established company, or a 244 year old constitutional republic!

  10. Natural hydrogen : A New Hope ?

    http://www.hydrogenfuelnews.com/conference-in-paris-revealed-a-much-larger-supply-of-natural-hydrogen-than-once-thought/8538750/

    Excerpts :
    “What was found during the past few years is there’s an abundance of natural hydrogen was largely underestimated.”
    “This is especially attractive, considering that natural hydrogen is not coming from fossil sources, but rather from inorganic reactions happening in the Earth’s crust and mantle at the present time. Two major possible sources include water reactions with minerals and degassing of the Earth interior, which could be rich in hydrogen accordingly to numerous studies. Therefore, natural hydrogen is carbon free and sustainable. “
    “we’re dealing with the primary source of energy, where H2 is not a vector like it’s currently seen from the point of view of hydrogen economy. No energy is required to produce natural hydrogen other that to capture it in the ground.”

    The question is now : how much can we extract ? At what pace ? At what cost ? And then, how is it possible to adapt our engines, machines, infrastructures to use H2 as primary energy source ? We aren’t saved yet.

Comments are closed.