Tag Archives: Germany

Renewable Power Gains, Costs, and Fantasies

01 Thursday Jul 2021

Posted by in Electric Power, Renewable Energy

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“Modern” renewable energy sources made large gains in providing for global energy consumption over the ten years from 2009-19, according to a recent report, but that “headline” is highly misleading. So is a separate report on the costs of solar and wind power, which claims those sources are now cheaper than any fossil fuel. The underlying facts will receive little critical examination by a hopelessly naive press, nor among analysts with more technical wherewithal. Of course, “green” activists will go on using misinformation like this to have their way with policy makers.

Extinguishing Dung Fires

The “Renewables Global Status Report” was published in mid-June by an organization called REN21: Renewables Now. Francis Menton has a good discussion of the report on his blog, The Manhattan Contrarian. The big finding is a large increase in the global use of “modern” renewable energy sources, from 8.7% of total consumption in 2009 to 11.2% in 2019. The “modern” qualifier is critical: it distinguishes renewables that made gains from those that might be considered antiquated, like dung chips, the burning of which is an energy staple in many underdeveloped parts of the world. In fact, the share of those “non-modern renewables” declined from 11.0% to 8.7%, almost fully accounting for the displacement caused by “modern renewables”. The share of fossil fuels was almost unchanged, down from 80.3% in 2009 to 80.2% in 2019. Whatever the benefits of wind, solar, and other modern green power sources, they did not make much headway in displacing reliable fossil fuel energy.

I certainly can’t argue that replacing dung power with wind, solar, or hydro is a bad thing (but there are more sophisticated ways of converting dung to energy than open flame). However, I contend that replacing open dung fires with fossil-fuel or nuclear capacity would be better than renewables from both a cost and an environmental perspective. Be that as it may, the adoption of “modern renewables” over the ten-year period was not at the expense of fossil fuels, as might be expected if the latter was at a cost disadvantage, and remember that renewables were already given an edge via intense government efforts to subsidize and even require the use of wind and solar power.

The near-term limits on our ability to substitute renewables for fossil fuels should be fairly obvious. For one thing, renewable power is intermittent, so it cannot be relied upon for baseload generation. The chart at the top of this post demonstrates this reality, though the chart is “optimistic” in the sense that planners have to consider worst-case intermittency, not merely average production by time-of-day. Reliable power sources must be maintained in order to prevent the kinds of disasters like we saw in Texas last winter when demand spiked and output from renewables plunged. This is an area of considerable denialism: a search on “intermittent renewables” gets you an unending list of rosy assessments of energy storage technologies, and very little realistic commentary on today’s needs for meeting base-load or weather-induced demands.

While renewables account for about 29% of global electricity generation, there is another limit on adoption: certain jobs just can’t be done with renewables short of major advances in battery technology. As Menton says:

“Steel mills and tractor trailer trucks and airplanes powered by solar panels? Not happening. … I think these people really believe that if governments will just do the right thing and require airplanes to run on solar panels, then it will promptly happen.”

Cost and Intermittency

Again, we’d expect to see more rapid conversion to renewable energy, at least in compatible applications, as the cost of renewables drops relative to fossil fuels. And major components of their costs have indeed dropped, so much so that the U.S. Energy Information Administration (EIA) now says they are cheaper than fossil fuels in terms of the “levelized cost” of new electric generating capacity. That’s the average cost per megawatt-hour produced over the life of a new installation. The EIA’s calculations are distorted on at least two counts, however, as Willis Eschenbach ably explains here.

The EIA’s cost figures reflect a “capacity factor” that adjusts the megawatts produced to presumed “real world” conditions. It’s more like a utilization adjustment made necessary by a variety of realities (intermittency as well as other technical imperfections) that cause output to run lower than the maximum under ideal conditions. Eschenbach reports that the factors applied by the EIA for solar and wind, at 30% and 41%, respectively, are overstated drastically, which reduces their cost estimates by overstating output. For solar, he cites a more realistic value of 14%, which would more than double the levelized cost of solar. For wind, he quotes a figure of 30%, which would increase the cost of wind power by more than a third. That puts the cost of those renewables well above that of a “combined-cycle gas” plant, which uses exhaust from gas turbines to generate additional power via steam.

The true costs of renewables are likely much higher than nuclear power as well, based on earlier comparisons of nuclear to combined-cycle gas. The EIA does not report a cost for nuclear power, however, because the report is for new capacity, and no additions of nuclear capacity are expected.

The Cost of Back-Up Capacity

Eschenbach notes a second major problem with the EIA cost comparisons. As discussed above, the intermittency of solar and wind power means that their deployment cannot provide for base loads. Other “dispatchable” power technologies, on which production can be ramped up or down at discretion, must be available to meet power needs when renewables are off-line, as is frequently the case. The more we attempt to rely on renewables, the more significant the intermittency problem becomes, as Germany, Texas, and California are discovering.

How to account for the extra cost of dispatchable power required to smooth production or meet peak demand? Renewables are simply incapable of doing so reliably, and back-up capacity ain’t free! Meeting demand at all times requires equivalent dispatchable capacity in the power mix. It requires not just dispatchable baseload capacity, but surge capacity! Meeting long-term growth in demand with renewables implies that new back-up capacity is required as well, and the levelized cost should reflect it. After all, those costs won’t be saved by virtue of adding renewable capacity, unless you plan on blackouts. Thus, the EIA’s levelized cost comparisons of wind, solar and fossil fuel electricity generation are completely phony.

Conclusion

Growth in wind and solar power increased their contribution to global energy needs to more than 11% in 2019, but their gains over the previous ten years came largely at the expense of more “primitive” renewable energy sources, not fossil fuels. And despite impressive declines in the installation costs of wind and solar power, and despite low variable costs, the economics of power generation still favors fossil fuels rather substantially. In popular discussions, this point is often obscured by the heavy subsidies granted to renewables. 

In truth, the “name-plate” capacities of wind and solar installations far exceed typical output, so installation costs are spread over less output than is widely believed. Furthermore, the intermittency of production from these renewable sources means that back-up capacity is still required, almost always from plants fired by fossil fuels. Properly considered, this represents a significant incremental cost of renewable power sources, but it is one that is routinely ignored by environmentalists and even in official reports. It’s also worth noting that “modern” renewables carry significant external costs to the environment both during the useful life of plant and at disposal (and see here). It’s tempting to say all these distortions and omissions are deliberate contributions to the propaganda in favor of government mandates for renewables.

Covid Framing #6: The Great Over-Reaction

16 Saturday May 2020

Posted by in Pandemic

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I visited my doctor last Wednesday. He’s a specialist but also serves as my primary care physician, and we share the same condition. He’s affiliated with a prestigious medical school and practices on the campus of a large research hospital. First thing, I asked him, “So what do you think of all this?” Without hesitation, he said he believes we’re witnessing the single greatest over-reaction in all of medical history. He elaborated at length, which I very much appreciated, and I was gratified that much of what he said was familiar to me and my readers. The risks of the coronavirus are highly concentrated among the elderly and the already-sick, and the damage that the panic and lockdowns have done to the delivery of other medical care is probably a bigger tragedy, to say nothing of the economic damage. Furthermore, the Covid-19 pandemic is certainly not more threatening than others the world has experienced since WW II.

But did we know all that in March? No one with any sense believed the low numbers coming out of China; major flip-flops and mistakes by public health officials in the U.S. did much to confuse matters and delay evaluation of the outbreak. Nevertheless, there were reasons to proceed more deliberately. The explosion of cases in Italy and elsewhere consistently indicated that risk was concentrated among the elderly, so a targeted approach to protecting the vulnerable would have made sense. Still, individuals took voluntary action to social distance even before governments initiated broad lockdowns.

The lockdowns, of course, were sold as a short-term effort to “flatten the curve” so that medical resources would not be overwhelmed. There was, no doubt, great stress on front-line health care workers in March and April, and there were short-term shortages of personal protective equipment as well as ventilators for the most severe cases (but it’s possible ventilators actually harmed some patients). But whether you credit government action, private action, or the fact that so much of the population was not susceptible to begin with, mission accomplished! The strains were concentrated in certain geographic regions, especially the New York City metro area, but even there, the virus is on the wane. There is always the possibility of a major second wave, but perhaps it can be handled more intelligently by the public and especially public servants.

And now for some charts. Due to day-to-day volatility, and because the data on case numbers and deaths fluctuate on a weekly frequency, the charts below are on a 7-day moving average basis. It’s clear that the peak in U.S. daily confirmed cases was over five weeks ago, while the peak in Covid-attributed deaths was about three weeks ago.

Unfortunately, there is more doubt than ever about the legitimacy of the numbers. New York keeps “discovering” new deaths in nursing homes, a situation aggravated by a statewide order in March prohibiting homes from rejecting new or returning patients with active infections. There are reports from across the country of family deaths that were imminent, yet officially attributed to Covid. In one case, a death from severe alcohol poisoning was attributed to Covid. Colorado announced today that it was revising its death toll downward by about 24%.

The data on confirmed cases are elevated because testing keeps expanding. The first chart below shows that the number of daily tests has more than doubled over the past 3½ weeks. At the same time, the second chart below shows that the rate of “positives” has declined steadily for over six weeks. That is likely due to a combination of expanded testing for screening purposes, as opposed to testing mainly individuals presenting symptoms, and fewer individuals presenting symptoms each day.

As Nate Silver said on Saturday:

“There are still *way* too many stories about big spikes in cases when the cause of those spikes was a big increase in tests. And remember, it’s a good thing when states start doing more tests!”

One commenter on Silver’s thread pointed out that more testing is likely to lead to more confirmed cases even if the true number of infections is declining.

I’ll highlight just a few individual states. Missouri’s peak in cases appears to have occurred several weeks ago, though a spike at the end of April interrupted the trend. The spike was partly attributable to a flare-up at a single meat-packing plant (facilities that are particularly conducive to viral spread due to close conditions and aerosols).

Here is Georgia, which began to reopen its economy on April 24. The pro-lockdown crowd confidently predicted the reopening would lead to a spike in cases within two weeks. Georgia is conservative in its reporting, so they don’t extend the lines in the chart beyond 14 days of the most recent reports due to potential revisions. Nevertheless, it’s clear that the trend in cases is downward.

The pro-lockdown contingent predicted the same for Florida, but that has not been the case:

The next chart shows seven-day moving averages of deaths per million of population for four states: CA, FL, GA, and MO. The labels on the right might be hard to read, but MO is the green line. Deaths lag cases by a few weeks, and Missouri’s death rate was elevated more recently, again owing partly to the meat-packing plant. These death rates are all fairly low relative to the northeastern states around New York.

Finally, here are death rates per million of population for a few selected countries: Italy, Germany, Sweden, and the US. Italy had the large early spike, while Germany lagged and with a much lower fatality rate. The U.S. suffered more than twice the German death rate. Sweden, which has pursued a herd immunity strategy, has come in somewhat higher. The Italian and Swedish experiences both reflect high deaths in nursing homes, which might indicate a lack of preparedness at those institutions.

Here is a post from just a few days ago with a nice collection of charts for various countries.

Returning to the main gist of this “framing”, the Great Over-Reaction, the predictions setting off this panic were made by a forecaster, Neil Ferguson, who has had a rather poor track record of predicting the severity of earlier pandemics. The model he used is said to have been poorly coded and documented, and it is underdetermined such that many multiple forecast paths are possible. That means the choice of a “forecast” path is arbitrary.

Make no mistake: Covid-19 is a serious virus. Ultimately, however, the Covid-19 pandemic might not reach the scale of a typical global flu: the current global death toll is only about two-thirds of the average flu season (global deaths from Covid-19 are now about 312,000—the chart below is a few days old). In the U.S., the death toll is modestly higher than the average flu season, but that is largely attributable to the New York City metro area. Worldwide, Covid19 deaths are now about 30% of the toll of the Hong Kong flu in 1969-70, 28% of the Asian flu in 1957-58, and far less than 1% of the Spanish flu at the end of WW I. Neither the Hong Kong flu nor the Asian flu were dealt with via widespread non-prescription health interventions like the draconian lockdowns instituted this time. The damage to the economy has been massive and unjustifiable, and the effective moratorium on medical care for other serious conditions is inflicting a large toll of its own.

Again, we can identify distinct groups that are highly vulnerable to Covid-19: the aged and individuals with co-morbidities most common among the aged. A large share of the population is not susceptible, including children and the vast bulk of the work force. The sensible approach is to target vulnerable groups for protection while minimizing interference with the liberties of those capable of taking care of themselves, especially their freedom to weigh risks. Nevertheless, those facing low risks should continue to practice extra-good manners…. er, social distancing, to avoid subjecting others to undue risk. Don’t be a close talker, don’t go out if you feel at all out of sorts, and cover your sneezes!

Single-Payer: Queue Up and Die Already

19 Sunday Jan 2020

Posted by in Health Care, Health Insurance

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I constantly hear this sort of naive remark about health care in “other major countries”, and while Chris Pope’s rejoinder below should chasten the ignorant, they won’t listen (emphasis is mine):

“[Bernie] Sanders recently argued that ‘our idea is to do what every other major country on earth is doing,’ but this claim is … fictitious. In fact, there is not a single country in the world that offers comprehensive coverage with an unlimited choice of providers, fully paid for by taxpayers, without insurer gatekeeping, service rationing, or out-of-pocket payments. In reality, there is a direct trade-off between ease of access to providers and the cost borne by individuals in out-of-pocket expenses.”

Pope’s statement pretty much strips bare the fiction of “universal” coverage, a concept too loosely defined to be of any real use except as a rhetorical device. It also highlights the non-monetary costs inflicted on consumers by non-price rationing of care. The presumption that government must provide universal health care coverage and that all other developed countries actually have that arrangement is incorrect.

Pope has another article at the Manhattan Institute site, written late last year, on the lessons we can learn on health care from experience abroad under various payer systems. This offers a more detailed comparison of the structure of the U.S. payment system versus seven other countries, including Canada, the U.K., Australia, and Germany. Single-payer tends to be the “gold standard” for the Left, but the only systems that “approximate” single-payer are in Canada and the U.K. Here is one blurb about Canada:

“Canadians have easy access to general practitioners, but getting an appointment to see a specialist is more difficult than in all the other nations studied in this report. The Canadian medical system provides the least hospital care, delivers consistently fewer outpatient procedures, and provides much less access to modern diagnostic technology.

Canadians also have limited access to drugs, according to Pope. And out-of-pocket (OOP) spending is about the same as in the U.S. At the first link above, Pope says:

“Canadians spend less on health care than Americans mostly because they are not allowed to use as much — not because they are getting a better deal. … Waiting lists are generally seen as the single-payer budgeter’s friend, as some patients will return to health by themselves, others will be discouraged from seeking treatment, and a large proportion of the most expensive cases will die before any money is due to be spent on them.”

Pope says this about the U.K. at the second link:

“U.K. hospitals often lack cutting-edge technology, and mortality after major emergency hospitalizations compares poorly with that of other nations in this report. Access to specialists is very limited, and the system falls well short of most other nations in the delivery of outpatient surgery.” 

Waiting times in the U.K. tend to be long, but in exchange for all these shortcomings in care, at least OOP costs are low. Relative to other payment systems, single payer seems to be the worst in several respects.

The other systems described by Pope are:

  • “dual payer” in Australia and France, with public entitlements and the choice of some private or supplemental coverage;
  • “competing payer” in Switzerland, Germany, and the Netherlands, whereby subsidies can be used to purchase coverage from private plans (and in Germany some “quasi-public” plans; and
  • “segmented payer” in the U.S., with two public plans for different segments of the population (Medicare for the elderly and Medicaid for the non-elderly poor), employer-sponsored coverage primarily from larger employers, individually-purchased private coverage, and subsidies to providers for “uncompensated care” for the uninsured.

Here is what Pope says about the various “multi-payer” systems:

“Dual-payer and competitive-payer systems blend into each other, according to the extent of the public entitlement in dual-payer countries …

… limitations in access to care are closely tied to the share of the population enrolled in private insurance—with those in Britain and Canada greatly limited, Australians facing moderate restrictions, and those in the other countries studied being more able to get care when they need it. 

The competing-payer model ideally gives insurers the freedom and responsibility to procure health-care services in a way that attracts people to their plans by offering them the best benefits and the lowest medical costs. While all competing-payer systems fall short of this ideal, in practice they consistently offer good access to high-quality medical care with good insurance protection. The competing-payer model is, therefore, best understood as an objective that is sought rather than yet realized—and countries including Germany, the Netherlands, France, and the U.S., which have experienced the most significant health-care reform over recent years, are each moving toward it.”

The U.S. has very high health care costs as a percent of GDP, but OOP costs are roughly in line with the others (except the Swiss, who face very high OOP costs). The U.S. is wealthier than the other countries reviewed by Pope, so a large part of the cost gap can be attributed to demand for health care as a luxury good, especially late in life. Insured U.S. consumers certainly have access to unrivaled technology and high-quality care with minimal delays.

Several countries, including the U.S., are plagued by a lack of competition among hospitals and other providers. Government regulations, hospital subsidies, and pricing rules are at the root of this problem. Third-party payments separate consumers from the pricing consequences of their health-care decisions, which tends to drive up costs. If that weren’t enough, the tax deductibility of employer-paid insurance premiums in the U.S. is an subsidy ironically granted to those best-able to afford coverage, which ultimately heightens demand and inflates prices.

Notably, unlike other countries, there is no longer an individual mandate in the U.S. or any penalty for being uninsured, other than the potential difficulty in qualifying for coverage with pre-existing conditions. Consumers who lack employer-sponsored or individual coverage, but have incomes too high to qualify for Medicaid or premium subsidies, fall into a gap that has been the bane of would-be reformers. There are a few options for an immediate solution: 1) force them to get insured with another go at an individual mandate; 2) offer public subsidies to a broader class; 3) let them rely on emergency-room services (which cannot turn them away) or other forms of uncompensated care; 4) allow them to purchase cheap temporary and/or catastrophic coverage at their own expense; 5) allow portability of coverage for job losers. Recently, the path of least political resistance seems to have been a combination of 3, 4, and 5. But again, the deficient option preferred by many on the Left: single-payer. Again, from Pope:

“Single-payer systems share the common feature of limiting access to care according to what can be raised in taxes. Government revenues consistently lag the growth in demand for medical services resulting from increased affluence, longevity, and technological capacity. As a result, single-payer systems deliver consistently lower quality and access to high-cost specialty care or surgical procedures without reducing overall out-of-pocket costs. Across the countries in this paper, limitations in access to care are closely tied to the share of the population enrolled in private insurance—with those in Britain and Canada greatly limited…”