Which Came First? The Idiots or the Eggs?
I recently noticed a dwindled supply of eggs at the local supermarkets. Various reasons have been given. For instance, it’s claimed that hens lay fewer eggs in cold weather and, perplexingly, despite global warming, it’s been uncommonly cold on the range in south-eastern Australia. Put that together with a rising preference for free-range eggs and Bob’s your uncle, fewer eggs for sale. Maybe.
One of the miracles of capitalism is the way in which the pattern of demand is mirrored by the pattern of production and supply, day in and day out. No-one controls it. Trying wouldn’t work. It’s too complex; too ever-changing. Of course, what Hayek called the pretence of knowledge will forever persuade intelligent fools, like the Davos crowd, that it can be controlled and managed from on high. Point all you like to shortages and queues for the staples of life in command-and-control regimes. The fools are not for turning. Like the Lady, sans the sense.
Juxtapose capitalism and shortages of staples, e.g., eggs or infant formula in the U.S., and you know something has gone badly wrong. Perhaps hens do lay fewer eggs in colder weather, I’m insufficiently bucolic to know. But you can bet your life that when there are material shortages, you’ll be able to find government regulations and bureaucrats wielding them. In the case of eggs, the likely culprit is egregious Covid lockdowns, which led to hens being culled when restaurants and cafes were prevented from opening and, thus, buying eggs.
Governments and their apparatchiks apparently think they can abruptly stop economic life and then just turn it back on again. Having insufficient hubris is not one of their shortcomings. And so it is that they believe they can defy physics and market forces and produce 24x7 base-load power using wind and solar as the principal sources. You might demur. Surely shortages and blackouts will occur with increasing frequency and length? Not in their modelling world, they don’t.
The Australian government is legislating a reduction in CO2 emissions by 43 percent (versus 2005) by 2030. Numbers of countries have put their climate targets into law. Canada, the U.K., Denmark, among others. Mostly it’s a net-zero-by-2050 law. The Australian law has the advantage of reaching its denouement when most of us are still alive. I dare say some of us have only an academic interest in what governments promise to do by 2050.
The laws are exercises in Canutism with a hint of Descartes. We say, therefore it shall be. But will it? Reducing emissions of CO2, and now, fashionably, nitrous oxide by extolling the virtues of bugs over beef, will be achieved only by replacing efficient fossil fuels with unreliable renewable energy and by switching our culinary tastes towards entomophagy. Leaving aside the delights of locust-eating, energy deprivation lies ahead and not too far ahead.
Coal-power capacity is being turned off in Australia. Twelve power stations have closed in the last ten years; none commissioned. Sixteen power stations with a total capacity of 23GW remain in the National Electricity Market (NEM). Incidentally, no surprise, China has approximately 1,064GW of coal power. Australia’s NEM times 46 and rising.
Liddell coal-power station at 1.5GW will be turned off next year. Eraring at 2.8GW in 2025. That will leave less than 19GW in the NEM. And, we are told by the Australian Energy Market Operator (AEMO) to expect more early closures. Why? The fleet is aging, in poor repair, and facing crippling fair-weather competition from wind and solar. Apparently, intermittent renewables, short-life batteries, yet-to-be-built pumped hydro and expensive natural gas will fill the breach. Hypothetical Hydrogen in due course.
Recent flooding of mines in northern New South Wales caused a shortage of coal. Natural gas prices spiked. AEMO stepped in to regulate gas prices and to temporarily suspend the market for wholesale electricity. Governments, federal and state, went in a trice from demonising coal to unabashedly calling for more, as I covered in a previous Pipeline piece. You will notice that blackouts and threatened blackouts, wherever occurring, are blamed on untoward weather or external events.
Uncommonly cold weather in Texas icing up turbines. Extremely hot weather in California, home to Death Valley. Then there’s the Ukraine and Putin’s energy price hikes. These are mere harbingers of what lies ahead as coal is driven from the system and onerous legal obstacles impede or prevent the development of new oil and natural-gas projects. A tipping point is on the horizon in Australia and no doubt elsewhere. We won’t have to wait until 2030.
Coal power can’t survive for much longer. Can’t compete with wind and solar on windy sunny days. And legislating emission targets, ineffective in itself, will make it even harder for new oil or gas projects to survive lawfare. Whether any new project is consistent with the legislated target for emissions will become subject to evolving common law. Activist lawyers will have a field day. Woke judges will delight in having an iron-clad rationale for siding with well-organised, well-funded, indefatigable green litigants. Game over; except, that is, for the realities of life. Apropos a warning from my friend Rafe Champion, who closely monitors these things, writing in the Spectator:
If we lose more fossil fuel capacity from the grid, Australia’s power supply will fail every time there is not enough wind or solar power available to meet the peak demands at breakfast and dinnertime. The records show quite clearly that these renewable energy droughts happen often and there will not be enough power.
Envision an upward sloping line depicting demand for electricity through time and a downward sloping line depicting declining capacity to deliver 24x7 base-load power sourced from fossil fuels. Once the lines cross, the pain begins. Windless days and sunless nights will quickly drain the batteries flat and reveal a yawning gap.
Capitalism is akin to a living system; defying entropy by taking in complex inputs; constantly renewing itself, growing and developing. It’s resilient. But as with natural living systems, like us, for example, it needs energy. Deprive it of energy and it becomes listless, malnourished, dead eventually.
At one level it’s inexplicable that nearly all governments and their apparatchiks, believe they can starve capitalism of affordable and reliable energy and yet will it continue to thrive. However, it’s explicable if you inhabit a hypothetical world, as they do, in which modelling prevails. Modelling; configured and constrained to show how it will be done, not whether it can be done.