There are many myths about energy and the economy. In this post I explore the situation surrounding some of these myths. My analysis strongly suggests that the transition to a new Green Economy is not progressing as well as hoped. Green energy planners have missed the point that our physics-based economy favors low-cost producers. In fact, the US and EU may not be far from an economic downturn because subsidized green approaches are not truly low-cost.
[1] The Chinese people have long believed that the safest place to store savings is in empty condominium apartments, but this approach is no longer working.
The focus on ownership of condominium homes is beginning to unwind, with huge repercussions for the Chinese economy. In March, new home prices in China declined by 2.2%, compared to a year earlier. Property sales fell by 20.5% in the first quarter of 2024 compared to the same period a year ago, and new construction starts measured by floor area fell by 27.8%. Overall property investment in China fell by 9.5% in the first quarter of 2024. No one is expecting a fast rebound. The Chinese seem to be shifting their workforce from construction to manufacturing, but this creates different issues for the world economy, which I describe in Section [6].
[2] We have been told that Electric Vehicles (EVs) are the way of the future, but the rate of growth is slowing.
In the US, the rate of growth was only 3.3% in the first quarter of 2024, compared to 47% one year ago. Tesla has made headlines, saying that it is laying off 10% of its staff. It also recently reported that it is delaying deliveries of its cybertruck. A big issue is the high prices of EVs; another is the lack of charging infrastructure. If EV sales are to truly expand, they will need both lower prices and much better charging infrastructure.
[3] Many people have assumed that home solar panel sales would rise forever, but now US home solar panel sales are shrinking.
A forecast made by the trade group Solar Energy Industries Association and consulting firm Wood Mackenzie indicates that US solar panel installations by homeowners are expected to fall by 13% in 2024. There are many issues involved: higher interest rates, less generous subsidies to homeowners, not enough grid capacity for new generation, and too much overproduction of electricity by solar panels in the spring and fall, when heating and air conditioning demand is low. The overproduction issue is particularly acute in California.
For each individual 24-hour day, the timing of solar energy production does not match up well with when it is needed. With sufficient batteries, solar electricity produced in the morning can help run air conditioners in the evening. But storage from summer to winter is still not feasible, and batteries for short-term storage are expensive.
[4] It is a myth that wind and solar truly add to electricity supplies for the US and the countries in the EU. Instead, their pricing seems to lead to tighter electricity supplies.
Strangely enough, in the US and the EU, when wind and solar are added to the electric grid, electricity supplies seem to get tighter. For example, one article says, Most of US electric grid faces risk of resource shortfall through 2027, NERC [regulatory group] says.
Charts of electricity supply per capita show an unusual trend when wind and solar are added. Figure 1 shows that, in the US, once wind and solar are added, total electricity generation per capita falls, rather than rises!
The EU, using a somewhat shorter history period, shows a similar pattern of declining total electricity generation per capita, even when wind and solar are added (Figure 2).
I believe that the strange pricing systems used for wind and solar in the US and EU are driving out other electricity suppliers, especially nuclear. With this system, intermittent electricity enjoys the subsidy of going first at the regular wholesale market rate. Other providers find themselves with very low or negative wholesale rates in the spring and fall of the year and on weekends and holidays. As a result, their overall return falls too low. Nuclear is particularly affected because it requires a huge, fixed investment, and it cannot be ramped up and down easily.
Besides the foregoing issues affecting the supply of electricity generated, there are also factors affecting the demand for electricity. Electricity…
Read More: The Global Economic System is Reaching Its Limits