Where the Institute of Public Affairs went wrong on renewable energy

Gerard Jackson

Alan Moran has been leading the Institute of Public Affairs charge against renewable energy policies. Now far be it from me to criticise Australia’s leading authority on the economics of renewable energy but, as was the case with Lord Cardigan and the Light Brigade, Dr Moran has mistakenly charged down the wrong valley.

His approach boils down to simply chanting that renewables are too costly, which is just another way of saying that they are less efficient than centralised power generation. It eludes him that the greens’ response is to argue that renewable energy will become more efficient if given enough time to develop. (I have been unable to find a response from any member of the rightwing to this assertion).

Every single member of our rightwing failed to grasp the simple and fundament fact that renewables just do not work. By this I mean that they cannot do the job that greens dishonestly claim for them. Expecting renewables to provide the vast amounts of energy required to drive an advanced economy is like expecting a Ford pickup to do the work of a 300 ton truck. It is a physical impossibility. The bald fact remains that so-called renewable energy faces insurmountable natural and economic obstacles. Yet this unalterable truth has never rated a mention from Alan Moran or anyone else at the Institute of Public Affairs.

There is nothing like providing examples to strengthen one’s argument. And when it comes to so-called renewable energy we have an abundance of examples, even though the right has ignored them, that reveal the economic insanity of these policies. Four years ago the Florida Power & Light Company completed its Martin solar plant. While the plant has a nameplate capacity of 75 MW it only delivers on average 18 MW, giving it a capacity factor of 0.24. To produce this paltry sum requires 500 acres. What its unthinking admirers consider to be a twenty-first scientific miracle is adjacent to the same company’s natural gas plant that generates a massive 3.8 gigawatts whenever it is needed.

Now let us put these figures into perspective. The solar plant requires 33.3 times the area of the gas plant to produce a miserable 0.0197 of its output. (Remember: a gigawatt is 1000,000,000 watts, so 3.8 gigawatts equal 3,800,000,000 watts.) Therefore, to produce 3.8 gigawatts would have to cover 25,333.3 acres or 39.6 square miles as against 15 square acres. To top it off, this super-duper leap into the future can only produce electricity one-third of the time. Clearly, the insurmountable natural obstacle is energy density.

The Institute of Public Affairs could have used the Martin plant, or some other solar compolex, to confront the public with the fact that solar energy is so dilute that it requires masses of land, labour and capital to produce a tiny fraction of the electricity that coal-fuelled or nuclear plants could produce with the same resources. It could then have stressed that this is why solar plants will always be a total failure. They could even have used this example to take a swing at those greenies who scream about ‘urban sprawl’ swallowing up land but see nothing wrong with blighting the landscape with destructive solar plants and wind farms.

Examples like this illustrate why it is physically impossible for solar energy, including wind, to meet the needs of a modern economy, or any economy above a medieval level of existence. Instead of stressing this fact Moran chooses to ignore it in favour of focusing on the price of electricity. But this approach diverts attention from the true costs of these phony alternatives. By focusing on present electricity prices Moran and those like him are in fact giving the Greens breathing space in which they can concoct fantasy tales about improved efficiency closing the so-called energy cost gap.

I stressed time and time again that a full-blooded attempt to switch the economy to alternative energy would be an economic disaster. As I frequently pointed out, the effect of this policy is to shift an industry’s supply curve to the left by raising its costs of production. The result is reduced supply, higher prices, idle capital, less investment and more unemployment.

Alan Moran’s response to this was to state that this argument was full of “deficiencies” and to accuse me of having “forgotten that businesses must cover their costs in the prices and volumes they supply to customers or go out of business”. But the fact is that the cost of alternative energy means that businesses will not be able to cover their production costs. They cannot shift their prices forward1. This, as Judith Sloan pointed out, is the “normal market mechanism”2. Moran’s comment was not an unfortunate slip. He also stated:

Businesses must pass on any additional imposts to their own customers—there is no “magic pudding” whereby costs not imposed directly on the final consumer are avoided3.

This is the old cost-push fallacy that helps explain why getting out the real truth about alternative energy policies has been such heavy going. To be fair to Moran, he has stressed in places that “renewables have been a lead weight around the economy” and that $20 billion has been wasted on these projects. But this fact also serves to highlight the deficiencies and contradictions to be found in his arguments.

And speaking of deficiencies, this brings me to Alan Moran’s total failure to recognise another crucial fact: because the energy source for renewables is so dilute the result will be enormous diseconomies of scale. How he managed this feat is completely beyond my understanding. However, the more intelligent Greens are not so remiss. Recognising that the insurmountable problem of diseconomies of scale could be used against them, they now argue that the problem can be solved by building huge numbers of solar complexes with an ‘optimum’ output of 300MW.

This is no solution at all. Diseconomies of scale afflict renewable energy as a whole and are not confined to individual plants. The more plants they build, regardless of size, the higher their production costs will be. There is no escape. Their solution is the equivalent of telling a mining company it is more economical to use hundreds of pickups to do what a few 250 ton dumpsters do in a matter of hours.

This is what Drs Arden and Marjorie Meinel, pioneers in solar energy, had to say about the greens and their alternative energy proposals: “Should this siren philosophy be heard and believed we can perceive the onset of a New Dark age.”

If only the likes of Alan Moran were as plucky and forthright, which raises the question of why the Institute of Public Affairs refuses to do the right thing and publicly and categorically announce that alternative energy does not work and never will, instead of producing stuff saying it’s just costly and inefficient.

Note: I cannot forget that when in 2008 John Humphreys wrote, courtesy of Greg Lindsay’s Centre for Independent Studies, an atrocious apologia for a carbon tax that also contained proposals to subsidise alternative energy projects Dr Alan Moran remained completely silent. The man who now presents himself as a courageous crusader against the carbon tax and alternative energy subsidies said nothing — in public. However, what he said in private about Humphreys’ paper is another matter. Moreover, it still remains private. Never once has this outstanding example of moral courage even mentioned Humphrey’s paper in public nor has he publically challenged Humphreys to defend his atrocity even though he now attacks the man’s arguments without referring to him by name. Readers can draw their own conclusions.

1Although it is true that in a free market the demand curve for a product is elastic above each firm’s equilibrium price this does not necessarily hold for the industry’s demand curve. If this turned out to be inelastic and all firms in the industry successfully raised their prices in unison then this action would be offset by downward pressure on prices elsewhere in the economy.

2Alan Moran’s charming response to my use of the same approach was to accuse me of not being the “full quid”, even though Steve Kates arrived at exactly the same conclusion.

3Alan Moran, Regulatory Subsidies to Renewable Energy in Victoria a Submission to the Victorian Government’s issues paper “driving investment in Renewable energy in Victoria”, Institute of Public Affairs, p. 6, 2006)

31 thoughts on “Where the Institute of Public Affairs went wrong on renewable energy”

  1. Jackson – the man who has done less than nothing to promote good economic policy in Australia – having a go at Alan Moran. Wow.

  2. Get this Humphreys, whatever policies Alan Moran promoted he was well paid for. He did nothing for nothing. We now know how the right tries to isolate and smear those they think might challenge their authority. If this was not so then they wouoldnt be scared stiff of an honest debate instead of calling people who disagree with them crazy. Moran smeared Gerry because he is afraid of him.

  3. Mr John Humphreys, sir: you are a complete and utter imbecile. Promoting a sound economic policy is never a problem and it is not something that deserves a fat salary. I know this for a fact because even an idiot like you can do it. What takes real talent, moral courage and a high level of intelligence is effectively explaining and defending it against the enemies of the market. On this level Gerry Jackson is a genius compared with what is getting paid at the Institute of Public Affairs. He completely destroyed the case for alternative energy in a single phrase he then explained why. He also annihilated your carbon tax paper and your stupid argument for subsidies. Even your mate Moran hates them.

  4. A wonderful put down, Nick. No matter what John Humphreys thinks, Alan Moran is no smarter or more immune from criticism than anyone else at the IPA. As for the post, I have never seen the case against renewable energy put as bluntly or effectively as this. If Gerry’s figures are correct it is devastating. They are also an indictment of Moran’s efforts. No wonder we have a stupid renewable energy policy and ended up with carbon tax, which we have only just got rid off.

    Nevertheless, I did have respect for Alan Moran and his efforts. Not anymore. I am now very disappointed in him. I thought he was better than that. Now he turns out to be just a mini-Humphries.

  5. That’s what I call a punchy and effective article. But I was getting the feeling as I read it that it was a little personal. I realised why once I got to the bit about Moran’s slimy attack on Gerry. I thought it was particularly spiteful when I found that Moran did not have the backbone to attack John Humphreys paper. The post’s ending left me with the sense that there just might be more to come.

  6. John Humphreys got his knickers in a twist again. listen, you nasty little twerp, what Gerry Jackson wrote is 100% correct. Renewables don’t work and that’s it. If Gerry got anything wrong Alan Moran can always come over here and put him right. Oh, I forgot, the fearless right doesn’t do debates. They do sleazy attacks and badmouthing. lets do the numbers, Steve Kates does a runner, Julie Novak does a runner, Sinclair Davidson does a runner and now Alan Moran is going to do a runner.

  7. A mini-Humphries! I love it. I didn’t think you had it in you, Arnold. Of course you are right about it being powerful. It is better than anything I ever read from the Institute of Public Affairs on the subject. the more I think of it the more I realise how brilliant it is in its simplicity. Just say renewables don’t work! Bingo. And what does John Humphreys come up with? Alan Moran is my super hero. Moran gets well paid for his stuff while people like Gerry defend the market out of principle. I doubt that Moran would understand that.

  8. Karla is right. Sometimes simplicity can be brilliant. Gerry summed up in one phrase what is wrong with renewables, “renewables just do not work”. Gerry has done in 5 words what Alan Moran was unable to do in all the thousands of words he has written on the subject. As for John Humphreys, lets not forget that Moran is part of the crew that does what it can to spike free market challenges from emerging. Instead of debating Gerry our “mini-Humphreys” resorted to personal abuse.

    I was a great fan of Brookesnews and I read very carefully Gerry’s articles on renewable energy and the effects of a carbon tax. I also read Alan Moran’s stuff. Gerry left him in the dust. Gerry clearly understood something that Moran does not. You have to start with basics and that is why he could show that renewables would be a disaster. Moran never did that. I was left wondering what the man was getting paid for.

  9. Moran’s attitude really pissed me off. Humphreys is the one who is not the full quid and not Gerry. How can this lot successfully defend the market when they cannot even defend themselves against Gerry’s arguments? Anyhow where were they when humphrys published his trash?

  10. I can see what Gerry’s tactic is. Force the proponents of renewable energy into a vigorous and public debate by loudly and persistently calling their energy policies destructive rubbish. Such a debate would virtually destroy all public and political support for renewables.

  11. From what I can see the science and the economics of renewables make them an economic disaster. So why do we still have this nonsense?

  12. You are not paying attention, Byron. We “still have this nonsense” because the Institute of Public Affairs and their mates at Catallaxy are running the show and they will ruthless spike any analysis that outshines their own.

  13. Decided to google Alan Moran on renewable energy. he only talks about money costs although he did once refer to “mythical low-cost new energy technologies” but he didn’t say why they are mythical. That approach wont convince anyone.

    I still couldn’t find anything at all by him that said alternative energy does not work. Everything was about money costs. This link is a typical example.

    I don’t think he even bothered to look at the technical side. Nothing I found by him contained the info that Gerry’s stuff has. Gerry is right. If renewables don’t work for the economy then no subsidies are justified. If Alan Moran feels free to attack Gerry behind his back the least he could is come over here, without being nasty, and explain why Gerry is wrong.

    Gerry was absolutely dead right regarding one point. Moran is being treated as if he is the only one with the expertise to criticise renewables.

  14. sorry, i can’t agree. There were a few articles I highlighted on this a few days ago which disprove your assertion. Hugh Saddler’s is possibly the best article.
    John Quiggin has also written on renewables.
    to be fair they do need either a carbon tax or an ETS to ensure the externailties bear the cost they should.

  15. Karala, Alan Moran’s behaviour is more evidence that there is no self-awareness on the right. He talks tough but always avoids direct confrontation with proponents of so-called renewable energy. Gerry tore into Siemens and ripped the guts out its chief financial officer, a guy called Kraes, for a pushing a renewable energy racket, calling him a liar. He went after the chief executive of BHP Billiton Marius Kloppers and called him a corporate quisling and a predatory hustler for pimping a carbon tax. No one on the right would have had the guts to do that. And that’s why we have stupid renewable energy policies.


  16. Hey guys. I just realised – it’s not just Graham Young who thinks Jackson is a crap writer and even worse thinker. Every editor in Australia has refused to publish his rubbish.

  17. Like you, Humphreys, Graham Young is a cowardly liar who lied about Gerry. I bet it is not the only thing that creep lied about. If Gerry’s stuff was bad Davidson, Kates, Moran and the rest of the gang would be tearing it to bits and publicly mocking him instead of desperately pretending it isn’t there. That not one of these cowards has the guts to engage him is absolute proof of that. The longer they stay silent the guiltier they look.

    So tell us, Mr Humphreys, why did Steve Kates backdown over Gerry’s post on the classical economists? Tell us, Mr Humphrys, why Sinclair Davidson and Julie Novak went to ground when Gerry posted his piece on Australia and the Great Depression? And while trying to invent excuses, tell us why Moran is such a jelly back.

    Finally, how would you know if Gerry ever submitted any articles?

  18. Ref: Nottrampis

    I emailed nottrampis to tell him that I do not think a single one of those he linked to on his site had refuted me. I also said that if anyone of them was prepared to send me rebuttal I would be only too happy to post it in full.

  19. Thank you, Gerry, for posting the truth. You can bet on one thing: if, somehow, by some fantastic technological innovation, the limitations on solar and wind should be lifted, THEN the greens would vigorously oppose them. Environmental preservation is NOT their goal — seeing today’s successful people crushed back to the stone age IS.

  20. …. it is physically impossible for solar energy, including wind, to meet the needs of any economy above a medieval level of existence ….

    Which simple Truth exposes another of the fascist Left’s filthy little secrets — or in this case, its Big One: That fascissocialism is a psychosis descended from a Malignant-Envy-driven self, own-culture and – invariably and inevitably own-species loathing that the fascist Left from the islamanazis through the Modern Era has always projected and always will – as-murderously as it can get away with – project on to the rest of us. And especially upon those of us that are Right!

    Brian Richard Allen

  21. I want to say changing to non-renewables is not and can never be an instant thing. if anyone thinks that then they are fools.
    It is a gradual thing as consumers react to price signals that either a carbon tax ( My preference) or an ETS creates so the externalities bear their true cost.

    As for Gerry I think he writes on topics. most of the time I disagree with him although perhaps not as much as most would think.

    This is why when I pie most but not all his articles I put them in MY Around the Traps for the week.
    I rarely do that for the other people citied.

  22. John Humphreys is hopelessly dishonest. He knows that no one gets published in Australian newspapers or magazines unless they are employed as a journalist or a commentator or they are a prominent personality or have the right connections. I mean to say, that’s the only reason he was ever published and that goes for Des Moore, Alan Moran and Davidson. I know this is so because of my experience in publishing and with advertising agencies. I am not being critical because I know that there are sound reasons for the media’s unwritten rule. The rule also explains why, when it comes to free market economics, you always get the same names year after year.

    A person would have to be incredibly naïve to think that that crowd would ever recommend an author whose views seriously challenged their own, particularly if he is in the Austrian school of economics. Their refusal to attempt any rebuttal of Gerry is all the proof you need and so is Humphreys obnoxious presence on this site. I personally do not object to someone putting their own interests first. I am only disgusted when they do it in a sleazy and cowardly fashion.

    And as for Graham Young, there is no way his phony Online Opinion would publish anything that would damage the intellectual reputation of anyone on the right and it’s silly to suggest otherwise. Furthermore, he proved himself to be every bit as dishonest as Humphreys. Anyhow, the man is a pretentious joke and doesn’t amount to anything. I’ll finish with something from one of Sarah’s comments.

    Sarah, That lot at Catallaxy have a queer sense of humour. Click on “Why we do this?”
    http://catallaxyfiles.com/why-do-we-do-this and you get, “Because it is dangerous to have unchallenged consensus opinions”.

    I think the irony is lost on Mr. Humphreys.

  23. It is very simple, Humphreys. All that Davidson, Kates, Novak or Moran have to do is write a post proving that Gerry is completely wrong and they are compoletely right. They can publish it in the IPA Review or they can use Catallaxy. Until they do something like that we will continue to believe the worst about them.

  24. I just spotted Gerry’s comment about nottrampis. What a contrast. No abuse or sneering, just politeness accompanied by an offer to post anyone nottrampis could find to refute his post on renewable energy. Imagine Catallaxy or the IPA doing something like that.

  25. That catallaxy mob pisses me off. Their idea of activism is to have Humphreys come over here do their dirty work because they don’t have the spine to do it themselves. Sherlock is right. the reason Humphrys is here is because Gerry really did nail his mates.

  26. I think nottrampis missed Gerry’s point on renewables and that is as he himself said energy density. And then there are the vast amounts of land they use. Now that Gerry has offered critics the opportunity to refute him mabe we’ll get an interesting debate.

  27. sorry mate but I do not think anyone is saying non-renewables will ever have 100% of the market and nor should they.
    Coal , oil etc will still be around but merely have less of the market as their true costs are seen and paid for by consumers.

  28. Nottrampis, I still think you are missing the point. greenies say we can run the economy on renewables. Gerry states you cannot. BTW this is something that Alan Moran has not said and that I think is part of the reasons for anger here.

  29. Biggles there wouldn’t be any anger about Moran if he hadn’t called Gerry crazy for simply offering an alternative argument that we know is perfectly sound. There was no need for Moran’s nastiness at all. It was just bloody spite.

  30. A group of environmentalists just declared that global global warming can’t be stopped without ending the “hegemonic capitalist system”. Calling it the Margarita Declaration these socialists said the “the structural causes of climate change are linked to the current capitalist hegemonic system.” This was publicly supported by 130 environmental groups. Everything they propose means more an more government control over the economy and our lives. The whole bloody green movement is just a front for a gang of socialist fanatics and useful idiots like John Humphreys have fallen for it. The guy is a moron.

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