Sometimes we are that much ahead of other media that it is downright scary.
Merkel fired her minister Röttgen after the massive defeat in Nordrhein-Westphalen. That wasn’t just because politics is unsentimental and she is a tough bitch. If I’m not completely wrong: The opportunity to become Prime Minister of Nordrhein-Westphalen was an attempt to give a talented; but difficult political allied a decent post to step down to.
Dov Gertzulin's DG Capital is having a strong year. According to a copy of the hedge fund's letter to investors of its DG Value Partners Class C strategy, the fund is up 36.4% of the year to the end of June, after a performance of 12.8% in the second quarter. The Class C strategy is Read More
Now Röttgen had worked with the very complex matter of energy supply and the integration of the “green profile”. Apparently Röttgen wasn’t up to the job – allow me with my modest experience in the energy sector to say: There is probably not a soul on earth that can get involved in these matters and avoid breaking their neck in the attempt to square that particular circle.
It doesn’t then help if you have all the personal charm of an old-fashioned telephone directory: It is of little use today and might be useful stabilizing a rocking table; but few read that kind of publication for the racy erotic scenes. The more local the politics the more charisma, personal contacts and detailed local knowledge means.
The substance of energy supply is fraught with peril:
1) It is a definite national security matter – you can’t have a national breakdown of a highly industrialized state – just because you can’t plug in your power tools. Here we should contemplate the recent developments in the Russian method of exporting oil and gas. The Russians have – using brute force and ignorance (and a LOT of money) redirected their pipelines away from the unstable (mentally, politically and economically) states of White Russia and Ukraine.
It is not maintaining political decorum to throw your opponent in jail and torturing them. Very clearly Putin and Russia wasn’t going to let 60% of the state budget be the toy of some rural nutcase.
To Germany it means elimination of the persistent threat of having their fuel pump turned off at the whim of corrupt transient state – and into the very firm hands on policies of Russia. Generally it must be considered an advantage for Germany and the EU as however nasty Russia might be you can do business with them – and expect agreements to be kept.
2) The diversification of energy supply away from a single source dependency has its share of problems –and Germany has picked them all: Oil, coal, gas, wind, nuclear, hydroelectricity, manure – and to top them all they are getting into solar power – in a country where most of the slopes are facing north. But why make things difficult for yourself, when with a little effort you can make then downright impossible?
These generation methods have all different characteristics: Wind might be relatively cheap, but it is fickle and so is solar power – but not fickle in the same way. Nuclear energy is on its way out – not living up to the expectations made for it fifty years ago. Coal is all but exhausted in Germany proper, though there is some in Poland, and just as hydro-electrical power, at hand in insufficient quantities. I don’t know the state of the East German brown coal mining; but that is low grade and incredibly dirty – I wouldn’t rule it out permanently, but it will take some serious smoke cleaning to avoid shrouding central Europe in a perpetual stinking fog – no use stop smoking living near a brown coal plant. Manure plants might not smell in themselves – but the fuel transport will – living next to a large scale pig-farmer, I know what I’m talking about.
3) The real crux of the question is the high tension national (and indeed European) grid. When you plan to transport large quantities of electricity over long distances, you better rump up that tension – high – really high. If you don’t, you’ll lose too much energy in transmission. Not only that, but it very advisable to make the wire capacity really big – you are talking about being able to replace the energy supply of a entire state with the flick of a switch (and I mean that literally) – that calls for some serious wire dimensions – and copper, aluminum is NOT cheap – you might even think of using steel on a larger scale to relieve the problems with tensile strength.
We are really talking technical challenges that certainly hasn’t be alleviated by every German state having decided their particular path to salvation – to the great confusion of the tree-hugging community (that particular segment of the electorate is particularly starved of humor in a culture already deprived of light banter).
In the north (Slesvig-Holsten) the SchleswAG seems to be all in to wind power. Some states are lured by cheap gas, some are facing shut down of their nuclear power plant (some of them of Russian design – in itself enough to provoke massive migration to the nearest toilet).
The dependability of supply is not the only upside to a national plan: There are some real investment savings as not every hamlet need to have an X% peak capacity generating reserve. The indirect savings are that a well managed system will allow the different plants to run at near maximum efficiency and use even electricity of poor quality efficiently.
“Low quality electricity?” You bet! F.i. Wind is – as I said – fickle and electricity generated at night can only to some extend compensate for lack of solar power (also at night), so excess production will have to be dumped as heating in a district heating system (basically adding a coffee percolator to the cooling system of f.i. a diesel powered plant).
That is just one of the technical drawbacks of nuclear power: Nobody lives near a nuclear power plant (not for long anyway) thus cooling has to be dumped into the river or steamed off in cooling towers. District heating tubing is very expensive pr. mile (insulated tubes and what have you). A well planned and managed coal power plant uses 80-90% of the energy in the coal one way or the other – a large part in heating for housing.
4) Financing this shift will have to be via sovereign bonds. So the timing is splendid for Germany where her sovereign bonds have negative real interest. Why do you think Merkel flatly refuses Eurobonds? She is not going to have PIGS messing with the German credit worthiness!
This doesn’t mean that some of the more harebrained schemes aren’t being abandoned – some of the wild windmill projects in Northern Germany (and Denmark for that matter) are being stopped. They were never going to be able pay themselves anyhow, and there is a limit to how long the supply vulnerability argument can be stretched.
In fact the “green” discussion is bogus! The main impact is not the cost effectiveness of the windmills and solar cells (it stinks): It is how much downward pressure on fossil fuel prices they can exert – and that is liable to be quite a lot, as they are financed with zero – or even negative – interest rates – i.e. we will pay you when we get a warm benevolent feeling around our hearts cockles. Do you think that is a consideration for a continent dependent on imported energy?
The next factor will probably be the rather predictable drop in copper (and other raw materials) prices as China winds down or collapses (as things will pan out). A large infrastructural program (when the exports to the “rinsing stars” of developing economies are liable to be hit – for industrial Germany) seem to just what the doctor ordered. Can Germany shift their production from making heavy construction machinery for export to heavy construction machinery to Europe? Well – again – what do you think?
Will this investment program – falsely labeled “environmental” – have an impact?
Major infrastructural programs generally have. Just look what railroads and Eisenhower’s highway system did to the USA.
The place to start is obviously where the main energy consumption is. Anybody surprised why the German job figures show signs of improvement? There will be further setbacks, but all the semi-knowledgeable talk about the Euro going out of style and problems in Southern Europe. Get things into proportion: Yup, fools and crooks are liable to be hit hardest, but for them to derail Europe?