The Green Europe and Unsustainable Finances Paradox

 

The graph below shows the total balance sheet assets of three of the world's major banks - the Fed in America, European Central Bank and Bank of Japan. It is noteworthy for many reasons. Firstly, the ECB has overtaken the other two with total assets of $9.6 trillion. Most of this is due to quantitative easing (QE) or money printing. 

The ECB has been engaging in large scale QE since 2015, long before the covid pandemic. Which is odd since most of Europe's economies were strong then. Certainly, here in Ireland, house prices were rising again, as were rents by 2015 and 2016. At the end of 2016, the government brought in rent controls to cap rent increases. Also in early 2016, the European Commission expected Ireland to be the fastest growing economy in Europe. Yet, Ireland was been flooded with this cheap ECB money which the government was only too happy to take and spend in an economy beginning to heat up (on a side note - it didnt fix the health service did it ?). 

As the pandemic hit in March 2020, the ECB went even further than US and Japan and printed enormous amounts of euros to the extent that they practically doubled their balance sheet. Although there are other factors impacting inflation right now, I believe this to be one of the main reasons, if not the most significant. Over half of this new money has gone to government bonds, a record amount of central bank financing of government debt. Normally, the government would have to go to the market to trade their bonds. But we are far away from normal in this age of negative interest rates. Now the central bank prints the new money to buy government bonds that presumably most of the market would not touch.

What is remarkable about all this is that, in a Europe completely captured by the green movement,  government finances have been allowed to reach such epic unsustainable proportions. Surely, government spending should be reduced so as to reduce consumption. Enabling countries to spend beyond their means and deferring the cost of excessive consumption should be the last thing that green politicians should want. It's true, that some of this spending has gone on renewable infrastructure such as wind turbines and pylons (about € 1 trillion) . But these technologies require large amounts of rare earths and metals to produce and so contribute to more consumption and more mining of the planet. Instead, the preferred method to reduce consumption is through taxation. The problem with taxing fuel and electricity is that it results in yet more government spending as the poor and working class become even poorer and are unable to pay for necessities like fuel and electricity. The government then gets locked into a spending cycle where pressure comes on it to increase social welfare supports and just recently the Irish government has planned to give every household €100 off their electricity bill. The cycle of taxation - borrow / spend - inflation - tax - borrow - inflation continues.

If we were really serious about sustainability then we would get our finances in order first. By encouraging people to save instead of spend, we slow that economic growth that eco warriors claim is destroying our planet. We put the future on a firm sustainable footing. But instead we have created the exact opposite environment of low / negative interest rates where people are unable to save and governments spend beyond their wildest dreams. 

It is incredible to me that green politicians are not aware of this simple paradox. Or perhaps that old saying "money talks" is more relevant than ever and still overrides all of the green buzzwords that politicians love to use. 

Why Inflation will not be Temporary

 

The current conventional wisdom is that inflation in Ireland will only be temporary as the economy recovers from the covid lockdowns. But this can only be the case if there was deflation during the lockdowns which the re-opening induced inflation would now be negating. The only deflation that occurred during the lockdowns that I can remember was petrol prices. Core consumer items such as food, electricity bills and rent did not fall or at least not in any noticeable way. A period of deflation is not equivalent with an economy being closed down. A rental freeze is not deflation. This is the mistake the economic experts are making. They also have not taken into account the effects of the large government spending. 

When a hotel or other business is shutdown, its prices do not reduce, the service simply ceases to exist. In fact, inflation will likely occur. Say two hotels close down in a region leaving only one hotel open. This will lead to a period of inflation as the remaining hotel raises its prices to take advantage of the increased demand and reduced supply. The difference between this scenario and the lockdown was that  during the lockdown all three hotels were shutdown meaning there was no deflationary pressure. Then when the hotels opened, they could charge high prices because people had a lot of savings. This was an unintended consequence of the high level of unemployment support.  And the same happened with rent, an opportunity was missed during lockdown to bring about rental deflation through a smaller Pandemic Unemployment Benefit. Instead, the government went along with the calls from the most populist spending cheer-leaders.  

Another point that is missed is that many businesses may never re-open again. This will bring further inflationary pressure as supply reduces. 

As you can see from the graph above, the sharpest fall in prices was in November 2020 when year on year deflation reached -1.5%. This was the sharpest fall in a decade. In less than 12 months however , the inflation has skyrocketed to +3.7%.

While there are other factors impacting inflation right now, such as our high dependence on global supply chains, the high levels of pandemic payments paid out last year are part of the reason why Ireland has inflation above the EU average and even above UK's inflation rate of 3.2%. People saved up, then spent most of it in-between the lockdowns leaving little pressure on businesses to drop their prices. Little haggling took place with landlords who should have been under severe pressure to drop their rents during a period of very little house moving by job hunters both within Ireland and those coming from abroad. 

But as every economist should know but seems to have forgotten, all this money had to be printed, which was happening at a high rate prior to the pandemic anyway. Too much money printing or quantitative easing (or whatever you want to call it) , and the inflation snail eventually catches up with you. Too much money ends up chasing too few goods.  And then the snail begins to look like a rabbit. 

The Financial Wonderland of Covid-19

According to economic experts, Ireland does not have to worry about paying back the massive borrowings that were needed to fund the endless lockdowns : 

“Government debt does not have to be paid back, particularly the kind that sits minding its own business in the vaults of the ECB” - Chris Johns, Irish Times

 The problem with that is Article 123(1) of the Treaty on the Functioning of the EU :

 

 This means that it is illegal for any Member State to use the ECB as a bank overdraft facility.  The only reason why we can afford the luxury of endless lockdowns is our access to lots of free money. The Irish government have already borrowed €20 billion interest free this year and they plan to borrow another € 20 billion next year.   This is in addition to around €35 billion borrowed at very low interest rates since 2015 from the ECB's PSPP programme, prior to the covid "pandemic". So the free money bonanza that has enveloped the EU is not a new thing as some commentators have argued. 

All this free money being created by the ECB has resulted in the ECB becoming the largest single creditor of the member states in recent years. The German Council of Economic Experts have warned that this could present a threat to monetary policy independence in the long term.

In 2008, after the banking crash, the debt laden on to the backs of the Irish was paid back through taxation. This makes the situation at present different as there is no pressure to increase taxes. 

The natural effect of all this free money is massive inflation but we have not seen any sign of that yet (it may help to reduce government debt by de-valuing the euro). What is the most likely outcome - my guess is that we will see some inflation next year but more importantly negative interest rates will skyrocket so that most of the extra cash lying around on deposit will be recouped.   

There is already a similar precedent for this in the EU banking system, when deposits were confiscated in Cyprus in 2013 in what became known as a bail in. 

So as Mr Johns maintains, the ECB may well continue to play ball by printing infinite quantities of free money but the price will be an eradication of savings, either through inflation or negative interest rates or a combination of both. It will also mean that the EU will once again bend and mold its own laws laid down in it's treaties. This further erosion of the rule of law will sow yet more discontent within the union. 

The Government's Spending on Covid Crisis is not Proportionate

The acting finance minister, Pascal Donohoe, said yesterday that the Covid 19 crisis has so far cost Ireland €13 billion and that Ireland will have a national deficit of €30 billion by the end of the year. The Taoiseach, Leo Varadkar, also said that Ireland cannot borrow cheap money forever. As the ECB prints more money, inflation will become even higher in Ireland and prices of goods will rise. Since natural levels of deflation have been prevented in Ireland since 2015 by the actions of the ECB, this means Ireland and the EU are starting at a higher inflationary point than would have been otherwise without the ECB bond buying, and is therefore on the road to very high rates of inflation. Negative interest rates may well be here to stay. High inflation may well suit the Government because it will make it easier to pay their previous debts, but it means savers and workers will continue to be robbed.

At the beginning of the crisis, the government generously paid out covid unemployment payments of €350 per week, almost double that of conventional jobseekers payments. It has since materialized that 40% of those on the covid payment were earning less than €300 in employment. Meanwhile, on the covid subsidy scheme, where employers are subsidized to keep employees on the payroll, employers cannot pay employees more than their average pay and still qualify for the subsidy.   So the schemes were very badly thought out. There is also some fraud occurring where payments were made to non resident people. 

425,000 people are on the employers subsidy scheme and 600,000 are in receipt of the covid unemployment benefit. Before the crisis, there was about 2.3 million people in the workforce. So about 44% of the workforce are now in receipt of government supports. In the UK, there was 28 million people in the workforce before the crisis. Now, 6.4 million people have been furloughed - the equivalent government subsidy scheme for those affected by the covid crisis and another 2 million self employed people are receiving supports from another scheme. That is a total of 30% of the workforce. 

So Ireland has one and a half times the equivalent numbers on covid unemployment schemes as the UK has. This means that the Irish government should be phasing out the support payments. However, it is only the British government which is talking about winding down their schemes to reduce the cost to the exchequer. 

This was partly a reaction to the Bank of England warnings about the UK facing the worst recession in 300 years.  Meanwhile, in Ireland, there is strong opposition to any talk of protecting the taxpayer in all this. Leprechaun economics dictates that we must go blindly into the night and not prepare for a recession. Faith in the ECB money printing machines has never been better. And anyway, sure equality measures will ensure that we will all be equally poor. Except, of course, the few at the top who benefit from high inflation.

Spending Overruns Undermine Emissions Targets

The European Court of Auditors expect that many EU countries, including Ireland, will not meet their 2020 targets for the share of total energy from renewables :

• six Member States are unlikely to meet their 2020 target as they need an increase in the share from renewables by: the Netherlands 7.4 pp, France 6.7 pp, Ireland 5.3 pp, the United Kingdom 4.8 pp, Luxembourg 4.6 pp and Poland 4.1 pp.  

•   the Netherlands shows the largest gap, with an actual average share of 5.9% for 2015/2016, versus an indicative RED trajectory of 7.6%. The gap to the planned NREAP share of 9.7% renewable energy in 2016 is even larger. 

•  for 11 Member States (Belgium, Cyprus France, Greece, Ireland, Luxembourg, Malta, the Netherlands, Poland, Portugal and the United Kingdom), currently implemented renewable energy policies and already planned renewable energy policy initiatives appear today to be insufficient to trigger the required renewable energy volumes purely domestically. 

• In addition, for 7 Member States (Austria, Germany, Latvia, Romania, Slovenia, Slovakia and Spain) there is some uncertainty related to 2020 renewable energy target achievement. Their capability of meeting their 2020 national binding targets will to a great extend depend on the levels of energy demand in case there would be a large increase in energy demand that brings their energy consumption back in line with the original trend indicated by the latest EU reference scenario.   

This should be seen as a serious indictment of Ireland's wind only policy which has completely failed to reduce emissions at any meaningful level. The idea that the EU will fine every one of these countries, that are also unlikely to meet their targets, now seems increasingly unlikely, as the widespread impracticality of the targets becomes manifest.

Ireland has already spent €86 million in buying carbon credits to offset it's high emissions with the cost potentially running to billions over the next decade. As with health and foreign aid policy (in fact every policy), Ireland's answer is always to spend more (taxpayers) money instead of doing some actual analysis to uncover the root cause of the problem.

Sustainable Economics is a Sustainable Environment

The simple fact, as this blog has pointed out previously, is that the more the government spend, the higher the emissions. Higher welfare spending, for example, results in more resources consumed beyond our means, more imported goods, higher immigration and more waste material like plastics. High government and private debt also encourages more wasteful spending.

A policy that would encourage more savings and less debt would result in lower emissions. Higher savings means more deferred purchasing, which means lower emissions in the short to medium term. 

It is perhaps somewhat ironic that the most climate change obsessed government in Irish history is also the worst offender when it comes to out of control spending. The Irish Fiscal Council last week reported that the government breached post financial crisis spending rules last year, and the increases in spending in recent years were not "conducive to prudent economic and budgetary management".   They warned that the spending had reached a similar magnitude to those prior to the 2008 crisis (funnily enough when the green party were last in government). Cormac Lucey has worked out that the cost of the spending overruns last year was € 3,500 per person living in the state. Instead of putting away the additional tax receipts into a rainy day fund, which would have lowered emissions, every cent has been squandered. 

And the more the government continues to spend recklessly, the more carbon credits they will need to purchase to offset the extra emissions meaning that the spending overruns are set to become a vicious cycle. If Ireland wants to get serious about reducing emissions it  needs a prudent government.

Switzerland and Sweden Used as Models for Irish Carbon Tax

A Benchmark for the Carbon Tax, no Benchmark for cheap electricity  

As part of a comprehensive policy package, carbon taxes will have a central role in guiding the energy transition by providing the economic incentive to switch from high-carbon to low- or zero-carbon technologies and products. In Ireland, the Climate Change Advisory Council has recommended a phased increase in the carbon tax from the current €20 per tonne to €80 per tonne by 2030. In terms of benchmarking, it is worth noting that some countries already have carbon taxes at the upper end or even in excess of this range, with the Swedish carbon tax currently at $139 (e112) and Switzerland at $101 (e81).

The Central Bank have now thrown their weight behind the sudden political push for an increase of the carbon tax in Ireland. Their recent report about climate change and it's alleged impacts on the economy fail to address the issue of the unsustainable levels of government and private debt in Ireland, which allow us to live far beyond our means and consume resources at a far greater rate than previous generations. There is no mention of unsustainable government spending and the bloated welfare state (The cost for a new hospital in Dublin has risen from €400m to nearly €2bn, welfare spending still stands at €20bn despite lowest unemployment for over a decade).

The Central Bank fails to understand that emissions are coupled with economic growth so that if climate change were really having an impact on the economy, we would be seeing economic decline right now, followed by a consequent reduction in emissions. They make the observation that 1991-2016 temperatures were higher than the period for 1960-1990, which actually supports the natural cyclical theory of climate change rather than the man made theory.  They also claim that insurance payouts due to extreme weather events are up. The 1940s were perhaps the worst decade for flooding and crop devastation in recent history but I can find no evidence that there were any insurance payouts at all. But I want to focus on one particular part of their report, the carbon tax. 

The purpose of the Central Bank presentation on climate change appears to be to groom Irish people for more taxes, specifically carbon taxes. 

They present Sweden and Switzerland as models for Ireland to follow in this regard.  What they fail to state is that Sweden has electricity prices at least 25% less than Ireland. But more importantly, Switzerland, which has a carbon tax equal to that proposed by Irish politicians, has had one of the lowest electricity prices in the world for many years, roughly half that of Ireland, which now ranks as one of the most expensive countries for electricity in the world.  Switzerland generates most of it's electricity from hydro and nuclear (as does Sweden). How is it that Ireland's indigenous wind industry cannot compete with Swiss hydro, an indigenous renewable source that does not lead to high Swiss electricity bills ?

The examples of Sweden and Switzerland actually undermine the central banks case for more carbon taxes in Ireland as it shows that we are already paying comparatively much higher for energy. A carbon tax similar to what was introduced into these countries could make Ireland the most uncompetitive country in the world for energy with actual knock on impacts for our economy far worse than "climate change". 

One could have perhaps made a better case for the carbon tax if wind energy had led to the cheap energy revolution that Irish people were promised.  But as we all know that never materialized.

https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20180807-1

Trumponomics Good For Ireland (So Far)

Irish Exports to US up € 1 billion in 2017 

Export figures published by the Central Statistics Office show that Irish exports to the USA since Trump was sworn in as President in January 2017 were up €1.1 billion (3%) from 2016 to €33 billion. And compared to 2015, Irish exports to US have shot up by 23%, a total increase of € 6.2 billion.

The biggest increases were in dairy, cereals and other food products, beverages, textiles, medical and pharmaceutical products, power generating machinery and manufactured articles. 

Trump's "America First" policies of tax cuts, reduced regulation and energy independence have led to increased investment and economic growth in America. This in turn means that America have imported more goods from Ireland. Some commentators warned that the opposite could happen - that USA would become more isolated and less dependent on imports - but the reality is that people living in strong performing economies purchase more goods, including imported goods.

USA remains Ireland's largest exporting market. The impact of Trump's tariffs is not known yet. He has also attempted to lure FDI back to America.

Wind Energy, Diseconomies of Scale and Market Cannibalization

How the Irish Wind Industry is Becoming a Loss Making Industry

by Owen Martin

This blog's recent analysis of the financial statements of wind companies showed that most of the newer wind farms around Ireland were making losses. One possible explanation for this is that the wind industry suffers from the opposite of economies of scale - diseconomies of scale. Economies of scale are defined as the cost advantages that an organization can achieve by expanding it's production in the long run. Diseconomies of scale occur when the long run average costs of the organization increases. It may happen when an organization grows excessively large. In other words, the diseconomies of scale cause larger organizations to produce goods and services at increased costs. 

There are a number of causes of this but the most relevant to the wind industry is Market Cannibalization. 

Implies a situation when an organization faces competition from its own product. A small organization faces competition from products of other organizations, whereas sometimes large organizations find that their own products are competing with each other.

If we take the wind industry as a whole, each wind farm is competing in the same market and their product is the same (wind energy). Therefore each wind farm unit is competing with each other. This is a particular problem during periods of high wind and low demand, when only a certain percentage of wind can be allowed into the grid. Eirgrid must then decide which wind farms need to shut down or curtail output. It is also a problem at the micro level when turbines are located too close together and each turbine is competing for the same but limited local wind resource (wind wake). 

As more wind farms are built, cannibalization increases at the macro and micro level (among wind farms and individual wind turbines). There must then be an ideal amount of wind capacity, say for example half of average demand which would be around 2,000MW, where cannibalization is very small.  At this point, most if not all wind farms are profitable. Cannibalization increases with each additional wind farm built beyond this point. As all the good locations get used, bigger and more expensive wind turbines are deployed in an effort to increase output, as well as increased numbers of turbines resulting in them being placed ever closer together . However, this increases costs per unit as both the local wind resource and electricity demand remains the same while the cost per turbine increases.  We are now at around 3,000MW of wind and there is evidence that wind farms built since 2010 are making losses so probably the ideal amount of wind is somewhere around that 2,000MW mark. 

http://www.economicsonline.co.uk/

In the case of, for example IT companies, market cannibalization can be planned or unplanned. Apple plan their market cannibalization so that their latest iPhone out-competes the older versions. In this way, they attract both existing customers looking to upgrade their phone and new customers who are looking for a new phone. The sales of the older models decline but the sales of the newer model outstrip past sales of the older models. However, in the case of wind energy in Ireland, the cannibalization is unplanned. It is as a result of over-saturation in a market with limited market share available for each new wind farm unit. 

This is a problem which nobody has really examined and is most peculiar to Ireland since it has a very small grid. Therefore, it really makes no sense to pursue wind energy any further until a full assessment has been carried out and possible solutions like battery storage are trialled. 

Ireland's Debt Problem

An economic policy based on rising debt and low corporate tax rates is not and never was sound policy - by Owen Martin

While the Irish media make a fuss over who will be the next leader of Ireland's biggest political party (Fine Gael), everybody ignores the real elephant in the room. According to the European Banking Authority, Ireland has the largest combined private and government debt as a percentage of GDP in the EU and two thirds higher than that of the US. 

 I'm not sure how this graph is not sending shockwaves through the Trump obsessed Irish media and political establishment - From EBA 

   
While Greece, Italy and Portugal have higher Government debt, Ireland's private sector debt to GDP dwarfs those countries. Which means that for the size of Ireland's economy, it's private sector has taken on alot of debt.

But not only businesses and industry. We have the 5th highest household debt as percentage of net disposable income in EU with about twice as much debt as income per household. This may explain how we rank so high in numbers of new cars across the EU.   People are taking out car loans that perhaps they can't really afford. It shows that we as a nation are still addicted to debt.

https://data.oecd.org/hha/household-debt.htm

Denmark, Netherlands, Iceland and Norway all have higher household debt than Ireland but these countries are doing much better when it comes to Government debt as percentage of GDP. Ireland ranks 5th in terms of Government debt to GDP. So while Greece and Italy have higher levels of government debt, they have about half of the household and private sector debt. Denmark's high level of household debt doesn't seem as bad considering they have half of Ireland's Government debt to GDP. 

https://data.oecd.org/gga/central-government-spending.htm#indicator-chart

Norway have the wealthiest government in Europe. In fact, they are far ahead of second place Luxembourg and Finland. Norway has slightly more household debt than Ireland. But that kinda makes sense - they are a wealthy country. Ireland has the 5th poorest Government in Europe (Italy and Greece lie at the bottom). Our government has dismal revenue, in part thanks to our low corporation tax rates. Yet we carry roughly the same household debt as Norway and have an even higher private sector debt to GDP.  This is called "living beyond our means".  Yes, Ireland could do with the € 13 billion in tax revenue owed from Apple. Laughably, the Irish government is appealing this decision. 

https://data.oecd.org/gga/general-government-financial-wealth.htm#indicator-chart

Irish Govt has the worst revenue in Europe yet reject a €13 billion EU tax ruling made in Ireland's favour

Of course if all that debt was used wisely, perhaps we could become richer. We are reliant on Norway's gas which arrives to us through UK pipelines. The Irish government have banned fracking so this dependence will continue for the foreseeable future. Imagine if some of that debt was being used to extract our own gas reserves.

Ireland spends the most on health after Iceland in Europe, yet we still have a permanently dysfunctional health system. 

Ireland has the third highest electricity prices in Europe.

The Irish government takes pride in divesting from fossil fuels and pushing through massive renewables and electricity infrastructure programmes that cost billions and without any proper assessment in the name of climate change.  We pride ourselves on having a massive welfare program and our representatives want to take in more refugees (without any proper assessment). Green/Left politicians cry out as to why we don't do more to tackle climate change, take on more debt (One cannot go the EIB looking for €5 million or €10 million; one needs to go looking for €2 billion. It is there.) and take in more refugees. Ireland is trying to save the world on a sinking ship but our politicians and media don't even realize we are on one.  Have we learned anything from the crash in 2008 ?


POSITIVES

On the positive side, exports are still strong and benefit from the stronger dollar as against the euro. If we went back to our own currency, it would be a strong one as the above graph shows. Presumably thanks to our exports. However, the weaker sterling is not good for exports to Britain. There is a chance that Ireland may actually benefit from Brexit if companies there relocate to Ireland. 

https://data.oecd.org/gga/general-government-deficit.htm#indicator-chart

Ireland has managed to get out of it's budget deficit abyss and back to something fairly normal. If Multinationals move out we could see some real problems, but we would no longer see the massive distortions to our GDP anymore. Perhaps that could be a good thing in the long run. Living on a false economy (now known as Leprechaun economics) is what got us into trouble last time.

I can't see how Ireland's economic fundamentals are much different to that of the Celtic Tiger era.   If anything, things have got worse.

Green Economics Brings Down Government

Green Party Northern Ireland manifesto for 2016 election

I always knew Green policies were bad because of, among other things the underlying economics, but I never thought I'd see the day when they would bring down a government assembly like it has in Northern Ireland. I blogged about the Renewable Heat Incentive scheme (known as Cash for Ash) before here. For every £1.00 spent on wood pellets, a participant in the scheme got paid £1.60. It didn't dawn on the people in charge that this was an invitation to burn as much wood as possible, effectively leading to the government burning it's own money. And lots of it. 

The cost of this outrageous scheme is estimated to be over £1 billion over the next 20 years. A huge sum for Northern Ireland which relies on a £10 billion block grant from England every year and runs a fiscal deficit of about £ 9 billion. Now there are claims that whisteblowers were ignored and pressure exerted by officials to keep the scheme going. 

You didn't need to be a trained economist to know the scheme couldn't work. Although the Green Party only has 2 seats in the assembly, there is a strong green ethos in the ruling party, the DUP. Their leader, Arlene Foster, took much of the blame and responsibility for the design of the scheme.

I could find no mention of renewables or green energy in the Sinn Fein (the second largest party) manifesto for 2016. It appears it was taken off the agenda in favor of their "Green Paper on Irish Unity".  Their leader, Martin McGuinness who was the Deputy First Minister, resigned last week over the matter forcing another election. 

Hopefully there is a lesson in all this - green policies and green economics are mostly for the scrapheap. The only people they benefit are the very rich in society.

Rise in PSO Levy Angers Irish Industry

It appears that reality is beginning to bite at The Irish Times in view of the many large industries (some of the biggest employers in the country) complaining about the rise in PSO Levy to fund more wind farms. 

Full Article Here.

In a submission to the CER before it arrived at its final decision, tech giant Microsoft, which employs 1,200 people in the Republic, said this penalises large energy users who are holding energy capacity in reserve to meet anticipated growth.

The multinational also points out that the rate at which the PSO has increased over the last five years represents a “rate shock” for large energy users and “puts the Ireland energy market at a disadvantage”. In a similar vein, Irish food and ingredients giant, Kerry, which employs 4,000 people here, warns that the charge will damage its competitiveness.

Irish Energy Blog has been warning about this for years now, but the warnings have fallen on deaf ears. The Irish Times have been calling for more renewable energy for a long time now and have allowed the wind industry to spread their propaganda far and wide. To be fair, they were not the only ones. 

The only journalist that is going to come out well of this is Colm McCarthy. Of course, there will be no accountability for what will happen in the next few years. An exodus of large companies coupled with a hit from any prolonged Brexit negotiations will see us well back in recession and rising unemployment once again. At a time of record low oil and gas prices.

Will we ever learn....

Hinkley Point

I've written previously about the economics of electricity generation here. 

The Hinkley Point debacle has confirmed my analysis. Modern power stations have become uneconomical to run, investors demand large subsidies as incentive to build them, governments have to keep the lights on while satisfying the ever increasing demands of the greens and their cohorts in the renewable unreliable energy industry.

It can only end in disaster, unless that is, Greg Clark and Theresa May can bring normality back to the post Brexit UK energy market. 

They will need to move quicker on the Article 50 button before the lights go out.  

The Modern Economics of Electricity Generation - UK, A Case Study

Hundreds of millions of pounds worth of subsidies will be handed to highly polluting diesel-fuelled electricity generators, under plans to preventpower shortages over the next few years.Companies have registered to provide 4,000 megawatts of standby power under a government auction scheme designed to help the UK cope with the intermittent nature of wind and solar energy - The Times, November 2015.

In an article written by Irish Energy Blog last June, it was stated that: (The economics of electricity generation)

 So now, we enter into a new era of electricity generation economics where subsidies are required to maintain all generators, not just the renewables. 

This is precisely what is now happening in the UK. Due to the fact that they have invested heavily in non dispatchable renewable generation, they are facing a shortage in dispatchable generation - that is, generation available on demand. The quickest solution to this problem is to use diesel generators. But these diesel generators will be running intermittently and would not be economically viable.  So the UK National Grid will pay subsidies to diesel generator owners to maintain their capacity available on standby.

A similar situation is happening in Ireland where DSUs (demand side units) get paid capacity payments. There is now 160MW of these diesel generators in Ireland.

Had UK invested in dispatchable plant, like CCGT gas plants, they would now be using cheaper and cleaner more efficient forms of generation instead of diesel. Unintended consequences of the Green Energy Rush are now hitting home.