Fear the boom and bust for Green energy

Tomorrow’s prosperity creating today’s debts

Many will have enjoyed Stephanie Flanders recent BBC 2 series, Masters of Money, covering Keynes, Hayek and Marx. For those who missed it, or are pushed for time, the Keynes versus Hayek debate is compressed down to 8 minutes of gangster rap in a well-known YouTube video, Fear the Boom and Bust. If you’ve not seen it, watch it.

What YouTube captures, but 60 minutes of BBC doesn’t quite unpick, is the insightful and elegantly delivered rap lyric, “malinvestments wreck the econo-mee”. This is Hayek down to a single line.

So what are these malinvestments, and just what have they got to do with our current economic predicament? Well, everything.

For Hayek, malinvestments are the result of easy credit, resulting in what should be tomorrow’s prosperity creating today’s debts. But malinvestments aren’t just about easy credit, they’re about how poor investments can undermine wider economic productivity, which is of course the ultimate engine of prosperity.

Saving carbon, pounds and pence

My previous blog post considered the impact of plant service life and capacity factor on wind and nuclear generation.  We used very round numbers (ignoring OPEX and financing) to illustrate how hard our investments in capital will work for us, both in terms of electrical energy generated and carbon displaced. The basic point was that nuclear has an advantage of 3 in capacity factor (90% nuclear against 30% wind) and another advantage of 3 in plant life (60 years nuclear, 20 years wind). So whatever wind does, nuclear has an in-built order of magnitude advantage. That’s a tough challenge.

But if we follow the advice of most environmental NGOs and don’t use nuclear, how else can we generate cost effective electrical energy and displace carbon dioxide. Well, the Institute for Public Policy Research think that wind can be part of the answer, as detailed in their recent report, Beyond the Bluster.