You will have to rebuild/replace the renewable generation infrastructure (wind and solar) every quarter of a century at a minimum- that is the one item that gets left out of all of the cost calculations. Windmills and solar panels are not built to last and can't be built to last. Siemens is already finding this out about the very large windmills they manufacture that are needed to bring wind to even close to a breakeven point on cost- the mechanical stresses on such equipment can't be engineered around- they wear out very quickly and must be replaced on a time-line that is actually well short of a quarter century.
Add in the need to either have a massive storage capacity that will cost trillions of dollars to build out for just the first time (it would also need to be replaced on a quarter century or less timeline) or we keep the present fossil fuel generation on stand-by 100% of the time, and there is literally no doubt about the outcome- it will be a financial black hole unless we change direction.
If you want to do away with fossil fuel electrical generation, it will have to be nuclear fission generation plants- it is the only technically and financially feasible solution, and that will be the case today and 50 years from now.
What's most odd about the industrial policy design is that it has nothing to do with how the industrial policies of the Asian tigers worked. They are trying to do basically the opposite of what they did under opposite circumstances. With the Asian tigers, they started with low-value manufacture of obsolete products in a circumstance in which they devalued their currencies aggressively for a long period of time against the dollar, which the US was generally happy with. They moved up the value chain from low on the value chain. They also benefitted from a lot of special circumstances related to the Vietnam War in the early days if you include Japan in the analysis.
With the current fad, they want to start at the tippy top of the value chain with an overvalued currency, no real plan for export-lead growth, no educational policy behind it, and goofy demographics. I don't think the plan is for it to work; the plan is just to steal as much public money as possible and to blame it on someone else when it fails. It doesn't make sense to analyze a criminal-operation-under-cover-of-law as a policy.
I get ads for the State Senator in my upcoming election every time I watch a YouTube video. What struck me is that the ad basically amounted to: "Subsidize Demand, Restrict Supply."
Of course the ad didn't say that. It just said that the state senator would make everything "affordable" (subsidize demand) while raising wages (restrict supply).
And that was it. There was no plan to accomplish this. Just a very fast montage showing a women working at an Amazon warehouse and doing laundry looking unhappy (VoiceOver, "so you can do less of this") and then a slightly slower shot her her smiling with her baby (Voiceover, "and more of this").
Alright, maybe it's just the nature of a quick Youtube ad. What does her website have to say. She has an "on the issues" page which seems to be a single paragraph on each issue usually without any proposed legislation. Let's try:
----
"MAKING VIRGINIA MORE AFFORDABLE"
From the shelves to the pump, higher prices have made it difficult for Virginians to make ends meet. *Candidate* will fight for Virginian families by pushing to bring down costs for things like health care and child care and fighting to lower taxes on middle class Virginians, while increasing wages for Virginia's working families. Every family in Virginia deserves the opportunity to thrive and that is why *Candidate* will work to expand economic opportunity, invest in our small businesses, and fight for working families.
----
So she's going to subsidize healthcare and childcare while lowering taxes and increasing wages. Sounds like...Subsidize Demand, Restrict Supply! Ok, so the long form of the ad is basically the same.
"If building an EV is so much more costly than building a standard or hybrid car..."
But it's not. A Nissan Leaf starts at $28k with a 40 kWh battery and $36k for the 60 kWh. A new base Tesla Model 3 with a 57 kWh battery is $40k and the long range option with a 82 kWh battery is $47k. These prices are before the $7500 federal tax credit. Even without that tax credit those prices are mass market friendly for the new car market.
A base gas-only new Honda Accord starts at $27k without any options. And the loaded Touring Hybrid model is $37k which is almost the same as a Tesla Model 3 without the tax rebate.
I completely agree with letting the free market decide and support ending government subsidies and such. But EVs are fully price competitive on the market as-is.
The California heavy truck EV mandates are of particular interest to me, as they seem to be a proxy for how the feds want to go. But these regulatory moves are ill-planned, ignoring real-world constraints and challenges. There are few in the trucking industry who aren’t in favor of making progress towards tackling climate problems, but only if there are legitimate, thoughtful steps planned. Not bureaucratic parades
On your initial question, I'd say the probabilities are monotone increasing in your list: most likely is Black Hole, while least likely is Total Success. I think it is possible that the average cost per electron for solar panels or windmills may someday be lower than the average cost per electron of a natural gas plant, but the additional infrastructure to allow an electric generating system heavily dependent on renewables (especially energy storage) will mean that solar and wind will never make economic sense at large scale.
Loss Leading for Economic Transformation: Subsidized companies are inefficient and go out of business when the subsidies get removed, but the business practices they pioneer get emulated by others and endure.
I like to see the pushback on industrial policy, but I think people underestimate how suboptimal the "free market" is in creating innovation, which is fraught with free rider problems. Industrial policy can help with that.
A useful metric is weight vs power output. A modern gas turbine can generate 40 mW and weighs about 8.5 tons. A very large windmill can generate about 4 mW and it weighs 90 tons (and this doesn't include the tower, either)
You can't manufacture this equipment in the US at anywhere near a competitive cost without tariffs. You can't even mine the minerals in the US today even if you could manufacture the equipment here competitively. The entire policy structure is utter madness.
We built the grid around gas oil generation of electrons....we can do the same with green produced electrons. No biggie. You folks that hate change....bug me.
* adapt or die....build a grid that must deal with our new reality*
You will have to rebuild/replace the renewable generation infrastructure (wind and solar) every quarter of a century at a minimum- that is the one item that gets left out of all of the cost calculations. Windmills and solar panels are not built to last and can't be built to last. Siemens is already finding this out about the very large windmills they manufacture that are needed to bring wind to even close to a breakeven point on cost- the mechanical stresses on such equipment can't be engineered around- they wear out very quickly and must be replaced on a time-line that is actually well short of a quarter century.
Add in the need to either have a massive storage capacity that will cost trillions of dollars to build out for just the first time (it would also need to be replaced on a quarter century or less timeline) or we keep the present fossil fuel generation on stand-by 100% of the time, and there is literally no doubt about the outcome- it will be a financial black hole unless we change direction.
If you want to do away with fossil fuel electrical generation, it will have to be nuclear fission generation plants- it is the only technically and financially feasible solution, and that will be the case today and 50 years from now.
What's most odd about the industrial policy design is that it has nothing to do with how the industrial policies of the Asian tigers worked. They are trying to do basically the opposite of what they did under opposite circumstances. With the Asian tigers, they started with low-value manufacture of obsolete products in a circumstance in which they devalued their currencies aggressively for a long period of time against the dollar, which the US was generally happy with. They moved up the value chain from low on the value chain. They also benefitted from a lot of special circumstances related to the Vietnam War in the early days if you include Japan in the analysis.
With the current fad, they want to start at the tippy top of the value chain with an overvalued currency, no real plan for export-lead growth, no educational policy behind it, and goofy demographics. I don't think the plan is for it to work; the plan is just to steal as much public money as possible and to blame it on someone else when it fails. It doesn't make sense to analyze a criminal-operation-under-cover-of-law as a policy.
Two cases in point: ethanol fuel requirements and Tesla, Inc. Neither would have survived as long as they have or to this day without subsidies.
I agree with your points Dr. Kling, but can you address the case for tariffs when they prevent regulatory arbitrage?
I get ads for the State Senator in my upcoming election every time I watch a YouTube video. What struck me is that the ad basically amounted to: "Subsidize Demand, Restrict Supply."
Of course the ad didn't say that. It just said that the state senator would make everything "affordable" (subsidize demand) while raising wages (restrict supply).
And that was it. There was no plan to accomplish this. Just a very fast montage showing a women working at an Amazon warehouse and doing laundry looking unhappy (VoiceOver, "so you can do less of this") and then a slightly slower shot her her smiling with her baby (Voiceover, "and more of this").
Alright, maybe it's just the nature of a quick Youtube ad. What does her website have to say. She has an "on the issues" page which seems to be a single paragraph on each issue usually without any proposed legislation. Let's try:
----
"MAKING VIRGINIA MORE AFFORDABLE"
From the shelves to the pump, higher prices have made it difficult for Virginians to make ends meet. *Candidate* will fight for Virginian families by pushing to bring down costs for things like health care and child care and fighting to lower taxes on middle class Virginians, while increasing wages for Virginia's working families. Every family in Virginia deserves the opportunity to thrive and that is why *Candidate* will work to expand economic opportunity, invest in our small businesses, and fight for working families.
----
So she's going to subsidize healthcare and childcare while lowering taxes and increasing wages. Sounds like...Subsidize Demand, Restrict Supply! Ok, so the long form of the ad is basically the same.
"If building an EV is so much more costly than building a standard or hybrid car..."
But it's not. A Nissan Leaf starts at $28k with a 40 kWh battery and $36k for the 60 kWh. A new base Tesla Model 3 with a 57 kWh battery is $40k and the long range option with a 82 kWh battery is $47k. These prices are before the $7500 federal tax credit. Even without that tax credit those prices are mass market friendly for the new car market.
A base gas-only new Honda Accord starts at $27k without any options. And the loaded Touring Hybrid model is $37k which is almost the same as a Tesla Model 3 without the tax rebate.
I completely agree with letting the free market decide and support ending government subsidies and such. But EVs are fully price competitive on the market as-is.
The California heavy truck EV mandates are of particular interest to me, as they seem to be a proxy for how the feds want to go. But these regulatory moves are ill-planned, ignoring real-world constraints and challenges. There are few in the trucking industry who aren’t in favor of making progress towards tackling climate problems, but only if there are legitimate, thoughtful steps planned. Not bureaucratic parades
On your initial question, I'd say the probabilities are monotone increasing in your list: most likely is Black Hole, while least likely is Total Success. I think it is possible that the average cost per electron for solar panels or windmills may someday be lower than the average cost per electron of a natural gas plant, but the additional infrastructure to allow an electric generating system heavily dependent on renewables (especially energy storage) will mean that solar and wind will never make economic sense at large scale.
There's a fifth possibility:
Loss Leading for Economic Transformation: Subsidized companies are inefficient and go out of business when the subsidies get removed, but the business practices they pioneer get emulated by others and endure.
I like to see the pushback on industrial policy, but I think people underestimate how suboptimal the "free market" is in creating innovation, which is fraught with free rider problems. Industrial policy can help with that.
Energy conservation used to be part of the mix, at least it had a place at the discussion table. Quaint!
Am I to understand that you feel we were robbed of the true number of pickup trucks, that we deserve on the road with us? I can scarcely imagine more.
On a more positive note:
https://www.talkingclimate.ca/p/green-energy-saves-the-day?utm_source=substack&utm_medium=email
A useful metric is weight vs power output. A modern gas turbine can generate 40 mW and weighs about 8.5 tons. A very large windmill can generate about 4 mW and it weighs 90 tons (and this doesn't include the tower, either)
You can't manufacture this equipment in the US at anywhere near a competitive cost without tariffs. You can't even mine the minerals in the US today even if you could manufacture the equipment here competitively. The entire policy structure is utter madness.
We built the grid around gas oil generation of electrons....we can do the same with green produced electrons. No biggie. You folks that hate change....bug me.
* adapt or die....build a grid that must deal with our new reality*
Cheers