New Technology in a Command Economy
By mandating Renewable Energy Targets (RETs) the South Australian Government has made its state a Command Economy in the energy sector. Such arbitrary economic targets characterized Stalin’s Five Year Plans. In fact, there are close parallels between Mao Tse Tung’s backyard blast furnaces and South Australia’s renewable energy program. Both are examples of a Command Economy in action. Both reveal its shortcomings in dealing with new technology.
In China in 1958:
First, peasants were organized into cooperatives of 20 to 40 families. This was at the village level. Next the cooperatives were replaced by county-wide collectives involving hundreds of thousands of people. In addition to calling for the creation of communes Mao urged the peasants to build backyard blast furnaces to make iron and steel for tools. The peasants were supposed to melt down scrap metal to make useful items such as tools and utensils. In practice the program worked backwards with peasants melting down useful items to produce unusable masses of metal. This happened because the State exhorted the peasants to increase production from the backyard blast furnaces and when they ran out of scrap they started melting down anything they could find, including tools and utensils.
In South Australia:
Renewables SA commenced in mid-2009, coinciding with the announcement by the South Australian Government to increase the state’s renewable energy production target to 33 per cent by 2020. This target was achieved in 2013-14. In 2014, a new target of 50% by 2025 was set, subject to national renewable energy policy being retained. South Australia’s significant installed capacity in renewables has translated into investment to the State of $6.6 billion to date, with some $2.4 billion, or 40%, of this occurring in regional areas. In recognition of the economic benefits, South Australia has committed to an investment target of $10 billion in low carbon generation by 2025.
Power Engineer, Terry Caldwell, commenting on the recent SA blackout:
Any change in power generation from wind generators has to be compensated for and chased by thermal power generation units which decreases their efficiency substantially and more than obviates any gain from wind generators. These severe load changes can create a power wave within the grid system that causes instability as the thermal units try to match the wind generators’ severe load changes.
The hypocrisy of the South Australian Government is unbelievable. Because they had knocked down their coal-fired thermal power stations they had insufficient power. So then they had to import it from Victoria through the state interconnector which was never intended for that purpose. When the interconnector exceeded its maximum load capacity, it tripped, as it was supposed to do.
Mao’s blast furnaces and SA’s renewable energy have a lot in common, viz.:
- Both were mandated “top-down” for primarily ideological reasons.
- Both ignored the advice of skilled experts.
- Both presume that complex engineering issues can always be quickly resolved by non-experts.
- Both regard constructive criticism as political betrayal.
- Both refuse to acknowledge the real reasons when projects fail and look for scapegoats instead.
How then would a Market Economy deal with the renewable energy issue?
It is the Command Economy’s central planning of renewables, not renewables themselves, that is the problem. After all, fossil fuels, by their nature cannot last forever and there is certainly good reason to believe that renewables will one day become our prime source of energy. However in a market economy this can only happen when the product, electrical power, becomes competitive, i.e. when it is sufficiently cheap and usable to gain market share. This is already the case with one renewable, hydro-electricity. Because it is dispatchable (i.e. it can be rapidly switched on and off) it can fetch a high spot price in the energy market.
This is the raison d’etre of the Basslink cable. Tasmania’s considerable hydro resource, painstakingly built up over a century, is now a hot property for purely commercial reasons.
However other renewables such as wind and solar are at the other end of the dispatchability scale; even worse than base-load power, they are intermittent. The wind must be blowing or the sun shining for them to be available. This makes them virtually worthless when developed alone. They can only be used alongside base-load or dispatchable sources of power. Ideally, for stability reasons, such intermittent sources should not be wired into the grid at all; they should be adapted to pumping energy into a suitable reservoir, such as a hydro dam, for later distribution.
The big advantage of hydro is that, by its very nature, it involves storage of energy in the form of potential energy of water stored in highland lakes. Wind and solar lack this property but they can make a very good match with hydro for this reason. In SA with no hydro power they don’t make much sense. Many commercial processes, from restaurant kitchens to aluminium smelters, require continuous sources of power. It can be disastrous if the grid goes down when the wind generators have been switched off due to high winds.
Other renewables include ocean waves, OTEC and geothermal.
Numerous schemes have been devised to harness ocean wave energy. By their nature they need to be large in order to intersect a wide cross-section of waves and this combined with the fact that they operate in one of the most hostile environments on earth, the breaker zone, means that they often show early promise only to be wiped out by a storm a couple of years later.
Ocean thermal energy conversion or OTEC is an arrangement of concentric pipes which exploit the temperature difference between surface and deep waters in the tropics. It requires very steep off-shore topography such as found around tropical volcanic islands. An OTEC unit has been operating in Hawaii since the 1960s but its power output is very low. OTECs are a useful adjunct to onshore fish farming as they bring up deep nutrients as well as energy.
Geothermal energy is a reality in New Zealand where there are numerous working installations scattered around the North Island rather like hydro dams in Tasmania. These are usually associated with pre-existing hot springs and geysers. NZ has the advantage of being volcanically active.
Another form of geothermal energy is “hot rock geothermal”. Volcanic activity is not required; instead what is needed is a large lump of granite. Granite is radioactive and heat builds up inside a sufficiently large volume. An experimental project near Innamincka in SA, operated by Geodynamics P/L for many years, experienced numerous technical problems and was finally abandoned last year after consuming half a billion dollars. The biggest issues were the huge cost of drilling deep holes into granite and, in this case, remoteness from the market. What is needed is a better rock drill, something a quantum jump ahead of the diamond bit, and based on the thermal fracturing of rock, perhaps. As with hydro, storage is part of the process and not a problem. Like hydro, hot rock geothermal would be dispatchable.
A Market Economy waits for the breakthroughs; a Command Economy does not recognize the issue.
Who knows what these breakthroughs will be? Let us hope that, when one occurs, this country still has a sufficiently robust economy to be able to benefit from it.
In 1958 Mao had some excuse for his actions. Russia had recently withdrawn 15,000 skilled technicians who had been helping China to industrialize. Mao knew that industrialization was essential if China was to survive. On the other hand, the renewable energy targets adopted by some Australian states are nothing more than virtue-signaling (it used to be called “cant”). The net effect of these RETs on Australia’s contribution to global warming is not even measurable.
SA’s power problems show that we have a good deal to lose by adopting this nonsense. It is hard to see what we might gain.