All posts in category Climate Change Economics

Financial costs of Fulcrum Power’s Green Diesel Plant

The BBC reports on a planning application submitted by Fulcrum Power to Plymouth Council to build a 20 MW diesel engine power station. This plant will operate backup for when renewables energy fails – mostly in the form of the wind failing to blow in the cold weather. Bishop Hill is, rightly, quite scathing because the diesel power is required to backup so-called green solutions. Josh weighs in with a cartoon

My posting is on the scandalous cost of this backup power station.

(Links are at the foot of the posting)

The BBC says

The application by Fulcrum Power is for a 20 megawatt (MW) Stor (Short Term Operating Reserve) power station on the former Toshiba plant at Ernesettle Lane, which company bosses said would cost “several million pounds”.

Its 52 generators will consume more than 1.1m litres of diesel a year, or about one tanker a week.

A litre of diesel with generate around 4kwh hours of electricity. (The normal measure is grams/kwh. A small diesel generator uses about 200 g/kwh and the RD of diesel is about 0.83 from memory). A 20 MW power station will therefore consume about 5,000 litres an hour of fuel. 1.1m litres will be consumed in just 220 hours, which means the plant is expected to operate for the equivalent of full power for just 2.5% of the hours in a year.

These companies will be paid a backup fee by the National Grid and then a rate per kwh generated. For this calculation I will look at just the cost per kwh. The fuel cost is easy. Diesel currently costs about £0.60 a litre, so that is £0.15 per kwh or 50% more than what I paid on my last electricity bill.

I tried to do some quick estimates and believe that the operating costs and cost of capital on “several million pounds” would be as much again. Being a little more curious, I did a search and found the “National Grid STOR Market Information Report No.19” on the National Grid’s Website. There is a bidding process every couple of months for Short Term Operating Reserve (STOR) capacity. Within the report is published the average winning and rejected bid rates. The most recent was season 8.6. As expected the bid is in two parts. First, a standby rate and second a (much higher) generating rate. There are bands, with the lower the standby rate, the higher the generating rate. I plugged the values into Excel and found that on all three rates Fulcrum Power could receive the equivalent of £0.65 Kwh. Gross Revenue would be around £2.86m. Deducting the cost of 1.1m litres for diesel leaves a contribution of £2.2m. There is probably a few hundred thousand of fixed costs, but payback on “several million pounds” looks to be pretty quick.

I have also done a check on other operating hours, shown below. The average in 2011-12 for STOR capacity was nearer 50 hours. At this level the revenue is much lower and more varied – from £1.66m to £2.12m. Dropping to just 5 hours per year still gives £1.34m to £2.04m.

Kevin Marshall

BBC Report

Fulcrum Planning Application

Bishop Hill blog report

National Grid STOR Market Information Report No.19

Green Energy Unicorns

Reblogged from NoFrakkingConsensus:

Everywhere it has been tried, green energy is costly, unreliable & financially unsustainable over the long term. Here's a reading list for those still in doubt.

I've recently been writing about the fossil fuel divestment movement which, according to some accounts, is "sweeping" US college campuses. In the opinion of the idealistic young activists involved in this movement, fossil fuels are passé.

It is not just sufficient to diagnose a problem and get some noisy activists to think up a solution. It is not even sufficient to get some of the greatest economists to devise the theoretically ideal policy. It is also necessary to drive that policy through to a conclusion. Donna Laframboise provides a catalogue of recent green energy failures. It is far from being an exhaustive list, but it amply illustrates that even if we are facing an imminent climate apocalypse, these green policies are not only useless, they are making us poorer, and thus making the situation worse.

1 Comment

by manicbeancounter on May 30, 2013 • Permalink

Posted in Climate Change Economics, Public Relations and Climate Change

Tagged Climate change policy, Donna Laframboise

Posted by manicbeancounter on May 30, 2013

http://manicbeancounter.com/2013/05/30/green-energy-unicorns/

Three Positive Ways to Counter Climate Denial

Anyone who reads this blog will know that I am deeply sceptical of the whole global warming scare. That stems from trying to compare and contrast the arguments through understanding different positions. One element I found coming to the fore is trying to shut down any criticism by maligning of opponents through untruths, derogatory comments and questioning of motives. A recent example of is Paul Syvrets’ attack on Jo Nova, a Vince Whirlwind’s follow up to my comment.

Suppose for one moment that alarmists of being on the side of science, and hold the fundamental truth about the coming apocalypse unless the human race repents of its evil ways. As climate science is based on public relations, I would suggest that the whole approach of attacking opponents and shutting them out of the media is a PR disaster. Tell somebody they are wrong and smearing them will get their backs up and help persuade others you are not on the side of truth. Now scientific models are too difficult for the lay public to understand, and outputs ambiguous to the uninitiated.

Let me suggest three, very positive, ways of winning over people from the “false prophets of climate denial”.

First is building up a track record in predictions

As I have often read, only true climate scientists can understand the science. But people will understand when through the using the climate models clear, bold predictions are made that later come true. Nobody will expect a 100% hit rate, but a good track record will be sufficient to convert the most waverers.

Let me help out with some examples, which I am sure some climate scientists can complete.

More than twenty years ago the models predicted a continuing upward trend in global surface temperatures if greenhouse gases emissions were not severely curtailed. Emissions have exceeded our worst expectations so…..
In 2000 in both Britain and Germany, it was predicted that children would grow up no knowing what snow was. The decreasing can trend can be found ……
Following the massive heat wave in Europe in 2003, it was predicted that would extreme heat waves would become more frequent. This trend is shown….
Following Hurricane Katrina, it was predicted that would be an upward trend in these severe storms. The evidence can be found……
In 2007 the UNIPCC predicted that climate change could lead to a drop fall in crop yields by up to 50% in some African countries by 2020. The latest evidence to support this prediction consists of…..
One of the most visible signs of warming is the disappearing snows of Kilimanjaro. This continuing trend can be found…..
One of the most dire predicted consequences of global warming is accelerating sea level rise. The latest data demonstrating this trend can be found at…
One of the biggest contributors of sea level rise is melting of the polar ice caps. Velicogna and Wahr 2006 predicted that the contribution to sea level rise from Greenland alone would rise from zero to 7mm per annum between 2002 and 2012. The actual data to support this is to be found……

Second is that the doubters believe that climate scientists practice pseudo-science.

To counter this

Show that the methods are in the tradition of the greatest scientists like Newton, Pasteur, Einstein and Feynman. Where different, explain why climate science’s methods are superior, or more appropriate.
Define clearly the boundaries of climate science, and the different skills and specialisms within it. People might then start appreciating what how complex and diverse the subject actually is.
Demonstrate how climate science learns from the different philosophies of science.
Demonstrate how climate science utilizes basic distinctions of philosophy. For instance the differences between open and closed questions, between positive and normative statements and between a priori and empirical statements.
Show how, like in the field of medical science, climate science is advancing and over-turning or modifying previously held views through better quality analysis.
Climate science needs to draw upon a number of areas. Demonstrating how the science draws upon specialists in statistics, forecasting and other disciplines where it overlaps.
Show how proper controls are being implemented and adhered to in order to prevent any conflicts of interest from, for instance, the same people creating temperature sets who are also the trying to vigorously promote their theories.

Third is the support of policy controls

Medical practitioners and pharmaceutical companies fully realise that whilst medication properly diagnosed can deliver huge benefits, it they can also generate great harm if there is not proper diagnosis, or the incorrect medication, or dosage of that medication was proscribed. Similarly, there would be great concern if the armed forces did not have proper control of their weapons, so that rogue elements could seize control of those weapons to start an insurrection.

From a policy point of view, the UNIPCC in the Summary for Policymakers in 2007 that

Peer-reviewed estimates of the social cost of carbon in 2005 average US$12 per tonne of CO2, but the range from 100 estimates is large (-$3 to $95/tCO2).

Given that it would be totally immoral to impose policy whose consequences are more damaging that the issue it is supposed to alleviate, proposals for the proper implementation and control of policy are to be found ……

I welcome any discussion or debate on these issues. If you have more examples, or help with links, please use the comments.

Kevin Marshall

Update 29/05/13 23.56

To encourage debate , left the following comment at http://watchingthedeniers.wordpress.com/six-aspects-of-denial/

In any realm of life, calling people names, or making claims that they think are false will only get their backs up. Further blocking them from any access to the media will generate the idea they are a victimized minority.
The best public relations present positive images about one’s own ideas. Negative images of opponents always backfire. I have made three suggestions how this might be done.
First, loudly proclaim the predictions of climate change that have come true.
Second, counteract the claims of pseudo-science by demonstrating that climate science not only builds of the greatest scientists and philosophies of science, but enhances them.
Third, disperse the claims about pursuing high-risk policies, by proposing safeguards and audit checks against them being usurped by profiteers and swindlers.
See http://manicbeancounter.com/2013/05/29/three-positive-ways-to-counter-climate-denial/

Update 30/05/2013 03.00

Watching the Deniers says:

May 30, 2013 at 12:14 am

Nice comment. Thanks for posting it.

I hope this leads to positive discussion, and recognition that there are legitimate positions that can be taken contrary to one’s own.

Update 30/05/2013 00.19

Have also contacted desmog.blog at http://www.desmogblog.com/contact_us with the following.

As you are experts in public relations, you must realize that negative images against opponents will create a group of “victims” who will garner support from the alleged “oppression” by the media. Much better is to present positive image of climate science. I have suggested three ways this could be done at my blog.

http://manicbeancounter.com/2013/05/29/three-positive-ways-to-counter-climate-denial/

Best Regards
Kevin Marshall

Update 02/06/2013 20.40

Posted to the Guardian here:-

Why all this negativity? Imagine if a similar public relations campaign was launched against those who deny that six million Jews died in the Holocaust? Headline would be

“Deniers of the Holocaust are wrong because they disagree with 99.9% of expert historians.”

It would have just created an underclass of believers in denial, claiming that the “truth” was being suppressed. I know that projections about the future are more difficult to persuade people of than historical facts, but a positive public relations campaign might include:-
1. Short-term predictive successes. A track record of bold predictions that turn out true is highly persuasive.
2. Showing that climate science is building on traditions of the greatest scientists and philosophies of science.
3. Third is the support of policy controls. Many nay-sayers point to alleged policy failures that enrich businesses at the expense of the poor. Campaigning for independent auditing of policy outcomes would show concern for wider society.

5 Comments

by manicbeancounter on May 29, 2013 • Permalink

Posted in Climate Change, Climate Change Economics, Public Relations and Climate Change, Science & Non-science

Tagged Climate Change Denial, Climate Sceptics, Jo Nova, Public Relations

Posted by manicbeancounter on May 29, 2013

http://manicbeancounter.com/2013/05/29/three-positive-ways-to-counter-climate-denial/

China’s Renewable Policy in Context – The Ningxia Example

China has been lauded for an aggressive renewable policy, particularly for wind turbines. When you next hear praise for this policy, consider the example of the Ningxia Hui Autonomous Region in Mid-China. There are wind turbines being developed here, but only in the context of massive industrial development. That primary motive for the industrial development in this area is coal. For instance

Sun Mountain has something China needs very badly to feed the thundering beast of its economy: 14.6 billion tons of coal reserves lying under its rocky, arid desert. There are also 5 billion tons of limestone, nearly 2 billion tons of dolomite, and – a modern touch this – 300 days of wind power per year. But there is no doubt that King Coal, a tyrannical monarch who has devoured land and lives in Ningxia for the past 50 years, rules Sun Mountain. If China is to quench its thirst for electricity and industrial chemicals the old king will be on the throne for many years to come.

The scale of the development is seen from another, 2008, article.

Shenhua Ningxia Coal Industry Company….. has begun construction of a 1000 square kilometer coal-chemical complex in northwest China’s Ningxia province. The 280 billion yuan (40 billion USD) project, located at Ningdong, 42 kilometers southeast of provincial capital, Yinchuan, will include coal production, electricity generation and coal chemicals, including coal to liquid fuel conversion (CTL). (Italics mine)

The coal will be partly used for power generation.

By the time the base is fully operational in 2020 it will have eight power plants with a capacity of 30 million KW.

That is eight power plants in one small region, each bigger than anything in Britain. But why develop coal to liquid fuel conversion?

With China’s crude oil imports rising 12.3 percent to 163.17 million tons in 2007, and the price of oil reaching $140 a barrel in 2008, one of the most keenly watched facilities in the Ningdong base will be its coal to oil conversion plants.

As of 2013, one of these plants is already in operation, and should be producing the equivalent of 70,000 barrels per day (bpd) if the mid-2006 forecasts were correct. The other is being constructed, with a capacity of over 90,000 bpd. Although these two plants will only provide the equivalent of 4% of the 163.17 million tonnes imported in 2007, China has huge reserves of coal. Further, Ningxia is one of just 30 main coal producing areas.

This 2008 article admits to drawbacks of CTL.

Coal liquefaction projects have many drawbacks from the point of view of the environment and resource conservation. Firstly they consume vast amounts of water, which is a huge concern in China’s dry northwest. Fifty-seven percent of the land area of Ningxia is desert. The Ningdong coal-chemical base will draw 100 million tons of water from the Yellow river every year. Secondly, the process of liquefying coal emits much more carbon dioxide than conventional coal fired power stations. When fully operational, the Ningdong base will discharge 80,000 cubic meters of Carbon Dioxide (CO2) per day …….. Finally, while liquefied coal fuels provide an alternative to crude oil, they are not necessarily an efficient use of coal. It takes four to five tons of coal to produce one ton of oil, so coal to oil projects deplete coal reserves much more rapidly than conventional coal power generation.

Therefore, China’s rush into renewables should be seen as just a small part of the general industrialisation of China, whilst minimising dependence on external energy sources. The eco-image, such as support for Earth Day and Kite Tournaments is just to keep the environmentalists from trying to sabotage China’s rush to western levels of prosperity for 1300 million people.

1 Comment

by manicbeancounter on April 30, 2013 • Permalink

Posted in China, Climate Change Economics

Tagged China, coal to liquid fuel conversion (CTL), Ningxia, Renewables

Posted by manicbeancounter on April 30, 2013

http://manicbeancounter.com/2013/04/30/chinas-renewable-policy-in-context-the-ningxia-example/

Bjorn Lomborg on Climate Costs in the Australian

Australian Climate Madness blog points to an article, “Wrong way, go back“, in the Australian Newspaper by Skeptical Environmentalist Bjorn Lomberg on Australia’s climate policies. This is my comment.

This statement in the article is significant

When economists estimate the net damage from global warming as a percentage of gross domestic product, they find it will indeed have an overall negative impact in the long run but the impact of moderate warming (1C-2C) will be beneficial. It is only towards the end of the century, when temperatures have risen much more, that global warming will turn negative.

Now consider the Apocalypse Delayed? posting of March 28th. Referring to an Economist article, it says that a number of empirical studies show that climate sensitivity is much lower than the climate models assume. Therefore, moving into the net cost range seems much less likely.
But why are there net costs? Lomberg’s calculations are based on William Nordhaus’s DICE model that

calculates the total costs (from heat waves, hurricanes, crop failure and so on) as well as the total benefits (from cold waves and CO2 fertilisation).

I would claim that the destablisation of the planet’s climate by rapid warming has very little evidence. Claims in AR4 that hurricanes were getting worse; that some African countries would see up to a 50% reduction in crop yields by 2020; that the Himalayan Glaciers would largely disappear by 2035; that the Amazon rainforest could catastrophically collapse – all have been over-turned.
Thus the policy justification for avoiding climate catastrophe as a result rising greenhouse gases is a combination of three components. First, a large rise in temperatures. Second, the resulting destablisation of the climate system having net adverse consequences. Third, is that the cost of constraining the rise in greenhouse gases is less than the cost of doing nothing.
It is only this third aspect that Bjorn Lomberg deals with. Yet despite that he shows that the Australian Government is not “saving the planet for future generations”, but causing huge net harm. Policy-making should consider all three components.

That is, there are three components to the policy justification to combatting “climate change” by constraining the growth in greenhouse gas emissions

That there will be a significant amount of global warming.
That this is net harmful to the planet and the people on it.
That the net harm of policies is less than the net harm of warming. To use a medical analogy, the pain and risks of treatment are less than the disease.

Lomberg, using the best cost model available, comes up with far less costs of global warming than, say, the Stern Review of 2006. He also uses actual policy costs to assess the net harm of global warming. Lomberg does not, however, challenge the amount of warming from a given quantity of CO2 rise, nor the adverse consequences of that warming. The Economist article
and editorial of March 30^th conversely challenges the quantity of warming from arising from a given rise in CO2, but just sees it as “apocalypse delayed” and not “apocalypse debunked“.

Kevin Marshall

Are Climate Change and Obesity Linked?

Judith Curry has a (somewhat tongue-in-cheek) look at the links between climate change and obesity.

One of the two references is to the care2 website.

Consider the three alleged “links” between climate change and obesity that Dr Curry summarised:-

Rising inactivity rates because of hot temperatures
Drought-induced high prices on healthy foods
Food insecurity promotes unhealthy food choices

Rising inactivity is commonly thought to be due to less manual work, the rise of the car and evermore staring at the TV or computer. If a rise of 0.8C in temperature were a major factor then in Britain you would see (for instance) the Scots being more active than those in the South of England, or people being more active in winter than summer. In both cases the opposite is true.

Drought-induced high prices would have to show that droughts were the main cause of high prices of health foods compared to junk foods. Maybe convenience and taste have something more to do with the preference for unhealthy diets. Also you would need to show that rising food prices are connected to decreasing crop yields. Biofuels may have more with the rising food prices.

Food insecurity diminishes as per capita income rises, whilst obesity increases. That is the poorest of the world have hunger as a problem, whilst the rich countries have obesity as a growing problem. Obesity may be a problem of the poor in the developed nations, but food as a whole is not a problem.

The above article is a very extreme example of

The underdetermination thesis – the idea that any body of evidence can be explained by any number of mutually incompatible theories

Kuhn Vs.Popper: The Struggle for the Soul of Science – Steve Fuller 2003 Page 46.

Kevin Marshall

Kyoto Protocol is now dead – DNR

The first stage of the 1997 Kyoto Protocol officially comes to an end today. We should say DNR – Do Not Resuscitate

The underpinnings of the Kyoto Protocol used benefit-cost analysis to achieve a compromise solution. To achieve is goal it needed ALL of the following assumptions to be true.

CO2 causing a massive increase in global warming.
For that warming to have massive catastrophic consequences.
For economic theory to provide a theoretical solution with benefits ≥ costs.
The actual solution matches the theory.
There are no unintended consequences of actual policy implementation need to be taken into account.
That the Kyoto Protocol was originally estimated at being 97% useless in constraining temperature rises.

CO2 causing a massive increase in warming.

If you still believe the hype that CO2 is going to cause a massive increase in global warming, you are now at odds with the latest estimates from the IPCC. David M. Hoffer at Wattsupwiththat shows why.

Massive catastrophic consequences

Where is the evidence of accelerating sea level rise; increasing tropical storms; desertification; accelerating rate of polar ice melt; disappearing Himalayan glaciers causing water shortages; or massively reduced crop yields in Africa leading to famines? Where is all the talk of reaching climate “tipping points”, which must be avoided at all costs? You will not find them in the latest AR5 SPM, because there is no half-decent scientific evidence to support these claims,

Support from economic theory?

William Nordhaus, the world’s leading climate change economist, calculates that the benefit-cost ratio is 1/7. Nordhaus accepts the first two points, but still calculates that on economic terms you should not touch the scheme with a bargepole. More recently, Dieter Helm has described emissions trading schemes as the most expensive way of reducing emissions. Both advocate a carbon tax.

Actual scheme matches theory

Kyoto proposed that countries adopt an emissions trading scheme. In the EU it did not work because credits were issued at too low a cost.

Unintended Consequences

The emissions trading schemes have essentially collapsed, mostly because there has been no commitment to extend Kyoto. Given that there have been numerous fraud scandals from the large through to the small, this is no bad thing. The schemes are open to abuse, yet the investment banks that run them make billions of dollars annually.

Kyoto is Limited

The Kyoto Protocol, if it has been fully implemented would have only constrained a projected 2 celsius rise in CO2 by 2050 by just 0.06 degrees. At the outset policy-makers knew it would be 97% worthless, yet still went ahead anyway.

Continued support for Kyoto must disregard the latest opinions of climate science, economic theory, and the practical problems of public policy-making. Continued support must implicitly support the investment banks to make profits at the expense of ordinary folk, and numerous fraudsters. You must also support a policy that was pretty close to useless at the outset, and now is positively harmful.

1 Comment

by manicbeancounter on January 1, 2013 • Permalink

Posted in Climate Change Economics, Global Warming

Tagged Dieter Helm, DNR, Kyoto Protocol, UNIPCC AR5 draft, William D Norhaus

Posted by manicbeancounter on January 1, 2013

http://manicbeancounter.com/2013/01/01/kyoto-protocol-is-now-dead-dnr/

Stephan Lewandowsky on Hurricane Sandy

Jo Nova posts on Stephan Lewandowsky’s analysis of Hurricane Sandy. Below is my comment, with the relevant links.

Lewandowsky has a lot to say about the overwhelming evidence for smoking causing lung cancer, but in substance has just this to say about the impending catastrophic global warming.

Trends such as the tripling of the number of weather-related natural disasters during the last 30 years or the inexorable rise in sea levels. Climate scientists predicted those trends long ago. And they are virtually certain that those trends would not have occurred without us pumping billions of tons of CO2 into the atmosphere.

There are 3 parts to this.

First, the economic analysis of natural disasters is Lewandowsky’s own. He ignores completely the opinions of Roger Pielke Jr, an expert in the field, with many peer reviewed studies on the subject. Pielke Jnr has shown there is nothing exceptional in the normalised cost of Hurricane Sandy. Furthermore, a 2009 report showed that New York is vulnerable to hurricanes, and the shape of the coastline makes it particularly vulnerable to storm surges.

Second, the sea level rise is a trivial issue. From the University of Colorado graph, it is clear that sea levels are rising at a steady rate of 31cm a century.

Third, he claims the predictions of unnamed “experts” have been fulfilled. A balanced analysis would point out that the CO2 levels have risen faster than predicted, but temperatures have not.

Last week I posted a proposal for analysing the costly impacts of global warming. Using the “equation”, I would suggest Lewandowsky overstates both the Magnitude and Likelihood that Sandy was caused by global warming. He misperceives the change in frequency (1/t). Furthermore, given than he has a track record in the highly biased use of statistics in his own field, and his deliberate lack of balance, the Weighting attached to anything he says should be negative. That is, like to newspapers of the Soviet Union, if Lewandowsky claims something, we should read between the lines see what he does not say. However, unlike the Soviet Union we are still able to look for alternative opinions.

Normalized US Hurricane damage impacts

2012_rel4: Global Mean Sea Level Time Series (seasonal signals removed)

1 Comment

by manicbeancounter on November 3, 2012 • Permalink

Posted in Climate Change Economics, Eco-Fanatics, Science & Non-science, Spin (Propaganda)

Tagged Climate Change Economics, Global Warming, Hurricane Sandy, Jo Nova, Lewandowsky

Posted by manicbeancounter on November 3, 2012

http://manicbeancounter.com/2012/11/03/stephan-lewandowsky-on-hurricane-sandy/

Costs of Climate Change in Perspective

This is a draft proposal in which to frame our thinking about the climatic impacts of global warming, without getting lost in trivial details, or questioning motives. This builds upon my replication of the thesis of the Stern Review in a graphical form, although in a slightly modified format.

The continual rise in greenhouse gases due to human emissions is predicted to cause a substantial rise in average global temperatures. This in turn is predicted to lead severe disruption of the global climate. Scientists project that the costs (both to humankind and other life forms) will be nothing short of globally catastrophic.

That is

C_GW= f {K} (1)

The costs of global warming, C_GW are a function of the change in the global average surface temperatures K. This is not a linear function, but of increasing costs per unit of temperature rise. That is

C_GW= f {K^x} where x>1 (2)

Graphically

The curve is largely unknown, with large variations in the estimate of the slope. Furthermore, the function may be discontinuous as, there may be tipping points, beyond which the costly impacts of warming become magnified many times. Being unknown, the cost curve is an expectation derived from computer models. The equation thus becomes

E(C_GW)= f {K^x} (3)

The cost curve can be considered as having a number of elements the interrelated elements of magnitude M, time t and likelihood L. There are also costs involved in taking actions based on false expectations. Over a time period, costs are normally discounted, and when considering a policy response, a weighting W should be given to the scientific evidence. That is

E(C_GW)=f {M,1/t,L,│Pr-E()│,r,W} (4)

Magnitude M is the both severity and extent of the impacts on humankind or the planet in general.

Time t is highly relevant to the severity of the problem. Rapid changes in conditions are far more costly than gradual changes. Also impacts in the near future are more costly than those in the more distant future due to the shorter time horizon to put in place measures to lessen those costs.

Likelihood L is also relevant to the issue. Discounting a possible cost that is not certain to happen by the expected likelihood of that occurrence enables unlikely, but catastrophic, events to be considered alongside near certain events.

│Pr-E()│ is the difference between the predicted outcome, based on the best analysis of current data at the local level, and the expected outcome, that forms the basis of adaptive responses. It can work two ways. If there is a failure to predict and adapt to changing conditions then there is a cost. If there is adaptation to anticipation future condition that does not emerge, or is less severe than forecast, there is also a cost. │Pr-E()│= 0 when the outturn is exactly as forecast in every case. Given the uncertainty of future outcomes, there will always be costs incurred would be unnecessary with perfect knowledge.

Discount rate r is a device that recognizes that people prioritize according to time horizons. Discounting future costs or revenue enables us to evaluate the discount future alongside the near future.

Finally the Weighting (W) is concerned with the strength of the evidence. How much credence do you give to projections about the future? Here is where value judgements come into play. I believe that we should not completely ignore alarming projections about the future for which there is weak evidence, but neither should we accept such evidence as the only possible future scenario. Consider the following quotation.

There are uncertain truths — even true statements that we may take to be false — but there are no uncertain certainties. Since we can never know anything for sure, it is simply not worth searching for certainty; but it is well worth searching for truth; and we do this chiefly by searching for mistakes, so that we have to correct them.

Popper, Karl. In Search of a Better World. 1984.

Popper was concerned with hypothesis testing, whilst we are concerned here with accurate projections about states well into the future. However, the same principles apply. We should search for the truth, by looking for mistakes and (in the context of projections) inaccurate perceptions as well. However, this is not to be dismissive of uncertainties. If future climate catastrophe is the true future scenario, the evidence, or signal, will be weak amongst historical data where natural climate variability is quite large. This is illustrated in the graphic below.

The precarious nature of climate costs prediction.

Historical data is based upon an area where the signal of future catastrophe is weak.

Projecting on the basis of this signal is prone to large errors.

In light of this, it is necessary to concentrate on positive criticism, with giving due weighting to the evidence.

Looking at individual studies, due weighting might include the following:-

Uses verification procedures from other disciplines
Similarity of results from using different statistical methods and tests to analyse the data
Similarity of results using different data sets
Corroborated by other techniques to obtain similar results
Consistency of results over time as historical data sets become larger and more accurate
Consistency of results as data gathering becomes independent of the scientific theorists
Consistency of results as data analysis techniques become more open, and standards developed
Focus on projections on the local level (sub-regional) level, for which adaptive responses might be possible

To gain increased confidence in the projections, due weighting might include the following:-

Making way-marker predictions that are accurate
Lack of way-marker predictions that are contradicted
Acknowledgement of, and taking account of, way-marker predictions that are contradicted
Major pattern predictions that are generally accurate
Increasing precision and accuracy as techniques develop
Changing the perceptions of the magnitude and likelihood of future costs based on new data
Challenging and removal of conflicts of interest that arise from scientists verifying their own projections

Kevin Marshall

3 Comments

by manicbeancounter on October 26, 2012 • Permalink

Posted in Climate Change Economics, Global Warming

Tagged Climate Change Analysis, Climate change policy, Global Warming, The Stern Review

Posted by manicbeancounter on October 26, 2012

http://manicbeancounter.com/2012/10/26/costs-of-climate-change-in-perspective/

RWE Atlantic Array to gain GBP169m in Windfall Profits

I have worked in management accounts in manufacturing industry for over 25 years. In that time I have learnt that audit controls are imposed to stop the potential for fraud, by eliminating any scope for fraud. In Britain climate change arena, conflicts of interest are huge, but not considered important. This is an example of why truly independent oversight is required.

In July there was ministerial sign-off of a proposed to change the Renewables Obligation (RO) with respect to offshore wind power. Assuming that this proposal is enacted and the Atlantic Array gets the green light, I calculate will give a £169m (US$262m) windfall profit to the scheme in the first ten years of operation.

The numbers behind this are eye-watering.

The revenue from a wind farm is from selling the electricity produced to the grid. This is currently 4.7p per kwh. I will assume that this will remain constant for until 2025. This might be a heroic assumption given that under current policies Britain will be producing far less electricity than demanded, but it is beside the point of this posting. What is relevant is the subsidy from electricity bills. The RO currently gives renewables a subsidy of £41.38 per megawatt hour. This is the rate for onshore wind. However, to encourage offshore wind power, this currently attracts a factor of 2.0 times the standard rate. In 2009 this was planned to reduce to 1.5 times the standard rate from 2014*. The new proposals are to give a more gradual and delayed decrease to 1.9 in 2015/16 and 1.8 in 2016/17. I have assumed that this will continue until the 1.5 level is reached.

In Germany the average output from the wind farms is just 16.3%. However, Britain is somewhat more exposed, especially the Bristol Channel. It is reasonable to assume to that average output will be 25% of capacity. Then I have assumed that RWE will choose to build the maximum proposed capacity of 1390MW. The lower end is 1000MW.

Calculations over a 10 year period are

The difference will mean an extra £168,572,951 windfall for RWE.

There is however a potential flaw in my analysis. If the Renewables Obligation works like the solar panels for houses, then the rate is fixed at the time of application. In other words, a scheme coming on stream in 2015 would now attract 2.0 ROC, instead of 1.5 for every year for 10 years.

If my analysis is correct, the difference will mean an extra £684,633,697 windfall for RWE over a 10 year period. That is $1.07 bn dollars. This from (the largest) of a number of similar projects.

1 Comment

by manicbeancounter on August 28, 2012 • Permalink

Posted in Atlantic Array, Climate Change Analysis, Climate Change Economics

Tagged Atlantic Array, Climate Change Analysis, Conflicts of Interest, Lundy Island, Tim Yeo

Posted by manicbeancounter on August 28, 2012

http://manicbeancounter.com/2012/08/28/rwe-atlantic-array-to-gain-gbp169m-in-windfall-profits/

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