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The truths they don't want you to read....

Tuesday, April 03, 2007

Windfarm Policy (2)

I know I haven't completed Statements 1-3 yet (I'm renaming them from "policies"), but I am having some difficulty in trying to ensure that all the disparate views are pulled together in a coherent form.

Mainly, I've just been short of time.

I think part 2 might be easier, and I have deliberately not used provocative language. Supporters/opponents can insert "very", "extremely" and "slightly" as appropriate.

Statement 4: There will be the potential for significant economic benefits for the Western Isles, which must be weighed against the impact on existing economic activity and the impact on the environment.


Anonymous said...

There will be the potential for significant economic benefits for the Western Isles, which must be weighed against the impact on existing economic activity and the impact on the environment.

Nobody could argue that ‘economic benefits’ are a ‘good thing’; but this where I find the ‘pro-wind farm’ argument invariably falters. Here’s why:

First, one needs to define the exact scope and duration of any potential benefit. As it stands, the phrase ‘significant economic benefits’ (which is most often used to justify wind farms, anywhere) is undefined. What level is ‘significant’? How does one decide the best means to allocate the inflowing resources (cash, primarily, in this case) to ensure the greatest benefit for the most people?

Second, one should consider the morality of any economic decision; while this may sound like an unusual criterion, I submit that it is in fact imperative—indeed, if one subscribes to the ‘manmade global warming’ hypothesis, which purports to be an issue on which we must make ‘moral judgements’, than in order to be faithful to that hypothesis, one should be making moral judgements on all manner of economic choices. I’ll return to this.

Regarding ‘scope and duration’, one of the major arguments in favor of ‘community buyouts’ of estates has been, essentially, that estate owners—a single person, family or syndicate—decided how to utilize local resources—land, hunting/fishing, agriculture, and tourism. The owners were, far and away, the major beneficiaries of economic activity, since they controlled the resources, and locals were essentially ‘marginalized’. Cash streams would tend to flow into the coffers of the landowners; and the profits tended to be spent ‘outside’ the community (ie, by absentee landowners, or merely because the profits were spent on goods and services that needed to be brought in from outside the community).

So, ‘buyouts’ were meant, in essence, to allow the economic benefits available to be diversified amongst the local populace in general.

My first point, then, is that any true economic benefit—if we’re following the justification used for ‘buyouts’—should benefit the maximum number of persons in the locality;

Second, the more sustainable such a benefit is in the long term, the better; all else being equal, a short-term benefit is less desirable than a long;

Third, those most affected by changes to X (land, existing infrastructure, etc) should benefit the most, proportionally, from the new benefit, while those least affected should benefit the least.

Last, does the project produce a net addition to the economy? If it does not, then the project is in fact a financial drag—to some degree it consumes resources (money, land, technical resources) and returns less than it consumes. This is, in short ‘negative economic growth’. For this reason, ALL inputs into a proposed project must be considered versus the nominal output (the ‘benefits’). If the former exceed the latter, one should make a moral judgement not to fund such a project.

The Yanks call such projects ‘boondoggles’ or ‘pork’ when their Congress authorizes them. Typically such projects rely upon infusions of public cash which create a net negative outcome for the public, while benefiting a small group.

So far as the ‘moral component’ of economic benefit, it seems to me that ‘wind farms’ in particular carry at least three moral considerations:

First—if you subscribe to the ‘manmade global warming’ hypothesis—one must consider whether any given technology will help, hinder or be neutral regarding ‘CO2 abatement’. This is ipso facto a judgement with moral consequences, since a project which does not in fact reduce CO2 emissions consonant with its adverse impact on the environment is, in fact, a project which literally does more harm than good in ‘global warming’ terms. And why? Because the money expended on such a project, for little or no gain, could be better spent on projects that did actually abate CO2. In other words, a misallocation of resources is in fact a moral decision (at least in the case of the ‘global warming’ hypothesis);

Second, one must make a moral judgement concerning a given project’s impact on the environment—and not just for ‘the environment’ per se, but because (as you allude in your statement) a project’s implementation may in fact impede economic benefit in other areas (eg, ‘tourism’, in this case);

A final moral judgement comes into play when one considers the means by which profits are generated:

First and foremost, the profits are generated with the least damage to ‘the Commons’ (not the chamber in Parliament!). I’m referring to the ‘tragedy of the commons’—the free and unlimited access to a finite resource which then results in that resource being exhausted. This occurs because the benefits of exploitation accrue to individuals, while the cost of that exploitation is spread across everyone to whom the resource is available. In the case of ‘the commons’, each person thinks ‘this is a very big commons; surely I can graze two horses as easily as one; or four horses as easily as two’—and because he does not suffer the immediate personal effect of overgrazing, the commons are soon exhausted by the fact that every person with access is grazing more animals in total than the commons can sustain.

In modern economies, ‘pollution’ is typically one cost which is generated by economic activity; and in extreme cases only a few benefit (say, the shareholders of a company) while the locals lose out.

Therefore, a moral economic benefit would be one which benefits at least as many people, or more, as those it harms; and the more sustainable such a ‘benefit’ is, the more moral it is as well.

To summarize:

1) Scope and Duration of Benefit:

How is the benefit allocated?

Do more, or fewer gain than they would from some alternative benefit structure? How long does the benefit last?

Do those most affected in their other economic activities stand to gain the most from the ‘new’ benefit?

Does the project provide a net benefit to the economy, or does the sum of ‘outputs’ less ‘investment’ provide a negative value?

2) Moral Issues:

Does the proposed development represent the most efficient allocation of resources to achieve a desired end?

How, and how greatly, does the development affect other existing or potential economic resources?

Are there alternatives which might represent greater return on investment, and/or less impact on other existing or potential economic resources?

Does the project exploit ‘the commons’, ie does it benefit only a few, while distributing the cost across the majority?

I submit that windfarms fail on every single count, and that alternative measures to produce more tangible benefit should be sought:

Scope and Duration of Benefit

Windfarms fail the first test of ‘how the benefit is allocated’ and ‘do more/fewer gain?’.

Quite simply, the revenue stream from windfarms is nearly identical to that of the very estates the Highlands and Islands worked so hard to purchase: the vast majority of revenues flow into the coffers of remote interests; such profits will not be spent in the local economy. Moreover, the imbalance between the percentage of profits accruing to the remote companies versus the percentage going to (generally) local authorities is enormous. In other words, local authorities get some ‘table scraps’, while most of the benefit flows away from the local region—in some cases, into the accounts of firms based offshore. Clearly this model does not provide efficient economic enhancement to the local community—at best, it provides a small, time-limited revenue whose size is paltry compared to the revenue enjoyed by the firms involved. While it may be tempting to say ‘yes, but we’re still getting SOME income’, the more correct counter would be to look at alternative projects which added value directly to the local economy, in the form of sustained local spending. Typically, a locally-owned business does this, by employing local help and by providing local goods and services—ie, by creating wealth, and spending it, locally.

To that end, I suggest that public policy should encourage the growth of locally owned and operated business enterprise rather than accepting a handout from a remote organization which then siphons off the vast majority of profit for itself.

Wind farms also fail the ‘proportional benefit to those most affected’. Since ipso facto a wind farm, by its mere existence, has SOME effect on other local enterprise—for better or worse—it follows that, logically, there should be roughly proportional benefit accruing to the locals so affected. Simple arithmetic indicates that the percentage of profit allocated to ‘community initiatives’, etc is very small indeed compared to that flowing into corporation bank accounts. The locals must assume the risk of decreased tourism, noise, blade flicker, and accident—and realize little or no gain thereby, since monies are generally given to the local authority rather than to individuals. It is entirely probable, then, that local individuals will suffer adverse effects and gain absolutely no financial compensation in return—excepting landowners who lease their property to windfarms, of course.

Therefore, wind farms provide an asymmetric reward/risk ratio which mainly favors the windfarm operators at the expense of locals.

Wind farms also consume more resources than they generate: when taken in total, wind farm development is only feasible due to public subsidy. Were it not the case, wind farm development would have been pushed long before the ROC regime came in.

As things stand, wind farms exist due to a skewed market—one which is decidedly not a ‘free market’:

The general public is forced to give money to developers via the ROC mechanism—clearly this is a serious derangement in itself, because development is automatically skewed in favor of whatever technology will generate the most immediate short-term return, artificially created by the ROCs, rather than seeking technologies which can ‘stand on their own’ and generate genuine, unassisted profits.

So, the first input into the system is a coerced one: taxpayer pounds.

Second, wind farm electricity does not exceed or even replace conventional electricity. Here’s why:

Conventional plants must run at all times regardless, to come online so soon as wind farm generation dips. Therefore, conventional plants run ‘as usual’, just as if no wind farms existed at all. Economically this makes no sense; wind farms are a tax burden which provide electricity which could be provided in any case, more cheaply, by conventional means.

Therefore, to date no conventional plants have been shut in any nation using wind; in fact, all such nations are contemplating expansion of conventional and/or nuclear plants, in part to backstop ever-increasing windfarm reliance.

Wind farms are thus a net drain on the economy; they consume a mandated taxpayer subsidy, while providing no replacement for conventional electricity. Worse yet, the electricity they produce is far more expensive (due to the ROC) than that produced by the conventional plants which, remember, are running in the background regardless.

So, one pays for more expensive electricity while realizing no corresponding benefit in the reduction of conventional production. The supposed ‘CO2 savings’ is also ludicrously small—if one could actually shut down a conventional plant at any point one could realize greater savings; but this cannot happen, now or ever.

As the Yanks would say, these are ‘boondoggles’ on the grand scale. Windfarms provide negative return on overall investment, once one factors in the hidden cost of the ROCs, and the fact that conventional powerplants continue to run in any case.

Moral Issues

Pursuant to the last point, clearly wind farms do not represent the most efficient allocation of resources toward ‘CO2 reduction’ amongst the various ‘renewables’ technologies; the mere fact that conventional powerplants continue to operate just as if no wind farms exist indicates as much. Alternative energy sources, while more expensive, are also more reliable, and could thus in fact result in the decommissioning of conventional powerplants. Tidal and wave energy, for example, could thus realize CO2 reductions, and even if they too were subsidized by ROCs would at least provide some net benefit thereby.

Windfarms also affect ‘other economic resources’ by the mere fact of their existence. Tourism, for example, is undoubtedly affected; and given that tourism is a major prop to the Islands’ economy, one should be sure that the effects on tourism are more than compensated for by wind farm benefits. Clearly such is not the case; windfarms, as noted, send profits to remote firms; the local economy doesn’t benefit. Tourism (and other local enterprise) tends to keep money within the local economy.

In other words, wind farms tend to ‘colonize’ a given area—revenues accrue to the non-local firm, while indigenous business (ie, tourism) either remains static or actually suffers from the presence of windfarms. Clearly this is an immoral outcome, since it results in less independence for locals, and greater dependence upon the largesse (such as it is) of a remote organization; it is also immoral because the local infrastructure is shortchanged in favor of accepting a ‘mess of pottage’; there is no incentive to develop business, with all the risk involved, if one gets a guaranteed stipend instead. In a remote area whose primary business will always be agrarian, fisheries or tourism, it makes little sense even to risk harming the latter while accepting a dole-out from a remote company whose interest in the area is subject to profit alone. What happens if the ROC regime is changed by a future government? What happens when Britain goes nuclear (as it will) and windfarms are viewed as a needlessly expensive source of electricity? The utilities will not be able to force the general population (who, remember, are paying for the handouts to the local community) to continue to pay for expensive electricity when far cheaper nuclear is available; nor will the utilities see any reason to continue running windfarms when they can simply shut them down in place and come back X years later to formally decommission them.

This will happen; if you are set on ‘windfarms’, I’d suggest at the least that you get a written guarantee that the operator will pay the guaranteed sum over the nominal life of the farm, whether it operates or not. Anything less leaves the Isles open to the vagaries of the energy market—and as cheaper electricity—reliable, too—comes online, wind farms will go the way of ‘fins on cars’.

Are there alternatives which might represent greater return on investment, and/or less impact on other existing or potential economic resources?

Yes; if one wants to exploit the Isles’ energy resources, both tide and wave can provide reliable generation—ie, the quality of generation which will make such projects competitive over their lifetime with new nuclear projects. Such projects, first and foremost, will not rely on conventional backup—and that in itself makes them more financially stable long term than ‘wind’.

Does the project exploit ‘the commons’, ie does it benefit only a few, while distributing the cost across the majority?

I believe this should be a self evident answer.

And that’s why I oppose onshore wind….

Anonymous said...

angus - i think we may have found a new source for the wind!

machaseo said...

eric, tell me that again...

Thanks for making the effort. A good post with some very well-argued points. I now feel confident enough to tackle 'War & Peace' ;-)

anonymous: a fatuous comment.