Portugal’s Green Energy Revolution and the true Cost of Gas, Coal and Oil

Don’t miss Elisabeth Rosenthal’s important and well-written piece at NYT on Portugal’s energy policy. With remarkable clarity given the potentially technical subject matter, she explains exactly how the Portuguese government went from generating 17% of its electricity from alternative sources a few years ago to 45% today. (That is electricity, not all energy; so they’re still filling up their automobile tanks with gasoline and heating their homes with natural gas for the most part. It will be a decade before even a third of their over-all energy comes from alternative sources).

Key, she says, was the virtual nationalization of the power grid, so that the state could ensure that power generated in remote, wind-swept or sunny areas, could actually get to the cities where it is needed. Likewise, the Portuguese scientists and engineers came up with ingenious solutions to the problem of intermittency (the inability to generate, e.g., solar power at night or when it is very overcast, or the inability to generate wind power when it is still). They use computers to make complex mixture calculations to keep the whole thing going, and, e.g., use blustery nights to pump water uphill with wind-generated power and then produce hydroelectric power with that during the days when energy use is intensive.

The next step is to build electric power stations and move to electric cars powered by the wind, sun and hydroelectric. The Portuguese officials involved point out that their success shows that such transformations can be accomplished relatively quickly.

Rosenthal is pessimistic about this model being replicated in the US, where much energy policy is legislated by individual states, and where the big electricity and coal companies have a great deal of sway over both state and federal governments. Likewise, the European Union’s sanctions on hydrocarbons helped the Portuguese, whereas there is no similar pressure coming from Washington.

I only have one criticism of Rosenthal’s excellent article, which is that when she speaks of the higher cost of electricity in Portugal, she neglects to note that cheap electricity in the United States is only cheap if one looks at the industry in a vacuum. Acid rain and air pollution from coal burning plants, the hidden but extreme environmental damage of fracking for natural gas production, and the creeping, insidious harm of global warming (which may well be implicated in Russia’s forest fires, Pakistan’s unprecedented floods, and the collapse of a Greenland ice shelf this week, the first two via a super-charged and unusually northerly jet stream) are only some of the costs of carbon-generated electricity that are not figured into the price paid by consumers on their monthly bills. But if that cost were included, then clean Portuguese energy would look cheap indeed.

I have noticed that the environmental costs of hydrocarbons are often viewed as an externality by reporters on economic issues, possibly because the American way of doing economics encourages such blinders. But as climate change accelerates in the coming decades, this ‘economic man’ way of thinking will increasingly seem anachronistic, in a world where a holistic accounting of the environment will be crucial for calculating human welfare.

19 Responses

  1. Well done to Portugal – some impressive progress. And I fully agree on the need to internalize the costs of climate change into fossil fuels and other energy use.

    To blame fracking for natural gas production for “extreme environmental damage” is a gross exaggeration, though. There is no way, technically speaking, that hydraulic fracturing is responsible for the problems reported in the Vanity Fair article. As the Portugal article points out, natural gas is important for backing up the renewable energy sources, and is much cleaner than coal. Let’s try a balanced appraisal of the merits and drawbacks of all energy sources.

  2. It’s true that “the American way of doing economics encourages such blinders” — moreover, the international monetary system existing today misallocates financial resources, leading to the misuse and wasting of physical resources. Instead of letting individual people participating in the marketplace determine which fiduciary media to use as money and which interest rates to apply in their dealings, governments worldwide enforce legal tender laws and interfere with interest rates. Two extremes are the USSR, where top-down planning resulted in overproduction of tractors and shortages of basic necessities, and Zimbabwe, where the printing of growing amounts of legal tender enabled insiders, who got the new money first, to keep pace with accelerating price inflation by investing in the local stock market while the general population became penniless and starved.

    The same thing is happening here today. That insiders get the new money first is clear from how Bush rescued Wall Streeters. But what the public doesn’t see is how the Federal Reserve enriches bondholders by carrying out open market operations, thus allowing bond traders to front-run the Fed. There’s been a nearly 30 year bull market in bonds that has fostered a sequence of bubbles in different market sectors, the most recent being in housing, which attracted financial and physical resources that far exceeded the needs of the populace.

    Governments worldwide intervene in the marketplace by passing laws and introducing regulations in order to correct the continually mushrooming economic imbalances that the monetary system generates, but the effort is fruitless and the mess keeps growing. The monetary system is bound to collapse, but that will be good for the environment if governments then set the marketplace free by eliminating subsidies to oil companies and by foregoing all other favoritism.

    • Great exposition of one of the libertarian credos. Doesn’t matter, but while agree that the whole trade-war-money-elites system does not “work” for the vast majority, if you throw away “government” without trying to fix what’s broken (collapse of any notion of governance, complete freedom for the harpies and tapeworms from consequences, Black Hole “economics” and the rest) you really do court descent back into the Mad Max world before Leviathan. There WILL be government and rulers and leaders, the species is wired that way — we will not regulate our social conduct ourselves, and whether by George Washington, or Pol Pot, we will be led and ruled. The notion of the mystical self-regulation of “the marketplace” is magical thinking of the worst sort.

      Get rid of government? What’s left to limit excesses and inherent recourse to abusive and predatory conduct? It can’t be an either-or proposition, any more than your body can do without its homeostatic physiological mechanisms.

      If you want to contend for something, press for systems and structures that drive our desires in the direction of the Golden Mean and the Golden Rule and satisfaction of real needs, not outrageous, solid-gold toilet seats and 500-foot “gold-plater” personal yachts. The chimaera known as the “free market” ain’t gonna do that, though competition and pricing and all that Hayekian disaggregated stuff are a part of the always-being-re-solved puzzle.

      If more people voted, in all the ways they can, for sustainability and meta-stability, it might prolong our species’ tenure on the planet by a bunch more generations, with a lot less suffering.

  3. Well done, but it doesn’t faze me much: Last year there were days in my country, Spain when the grid was supplied only with electricity generated by eolic plants, there were even some nights when part of the wind farms had to be disconnected because there was an excess of production. We export electricity to Portugal and France.

    Electricity is heavily subsidized everywhere, one way or another. In Spain we’ve been subsidizing renewables for ages, and investing in them is a no-brainer for financiers: the state guarantees a set price for kw for a certain period, meaning that with a simple wind map you can calculate exactly the return on your investment. We have developed a whole industry of suppliers of generators, solar panels, etc.

    What amazes me, considering this, is that the nuclear lobby is gaining presence and conquering some politicians from the right, who are presuring the Spanish government to invest in new nuclear power plants.

  4. I was only disappointed that neither the article nor you mention using solar panels on homes and businesses. I don’t understand why some of the money going to upgrade the energy grids isn’t instead being used to help pay for this. Decentralization is an ideal way to provide energy to homes for many reasons.

  5. Shouldn’t we include the military costs, or at least some of them, in the calculation of energy cost?
    Thank you for your insightful blog.

  6. I too applaud Portugal having the courage to do what we all know needs to be done.

    I would also add that although personal transportation, like an automobile, is convenient, it is a very expensive use of energy. Both in the manufacture of the vehicle and its many components, and in its operation, both of which are often acknowledged, but also in building and maintaining roadways. Concrete requires a lot of energy to produce, and the cost of asphalt is becoming more expensive even with huge government subsidies. So even if we manage to move to electric cars, which seems likely, the number of lane-miles of highway in the US is unsustainable.

    Given the large distances and spread-out nature of our cities, I don’t think we’ll see the end of cars. But we should rethink how we build our cities, with more emphasis on pedestrians and cyclists and mass transit alternatives (train systems), so that heavy vehicles like cars are used less often. That would reduce our reliance on energy-expensive uses, both for the vehicles and our roadways. Not to mention the potential reduction in the approximately 40,000 annual vehicle accident deaths in the US.

    • Redesign the city that way and you will find yourself being the only person living there. You and those who can’t leave. I already avoid cities because of the difficulty in getting to where I need to go. Making me ride a bike or walk would completely keep me out.

      That said, I love the idea of a city where I don’t need a car in order to get everything I need, i.e. job, stores, entertainment. I spent some time in Italy and the markets were really nice. I still needed a car for work and entertainment. :0)

      • “Redesign the city that way and you will find yourself being the only person living there. You and those who can’t leave.”

        James, last time I checked, there were still quite a few people living in NYC. Many people in NYC don’t own cars at all. Many of the rest don’t drive them to work every day.

  7. “cheap electricity in the United States is only cheap if one looks at the industry in a vacuum.”

    Unfortunately, that is the only way costs will ever be viewed in the United States; the dollar out-of-pocket cost to the consumer. This is the country where every measure that requires the government to do more is a winner, and every measure that raises taxes is a loser.

  8. As an Irish guy can say that Ireland is not far behind.

    link to irishtimes.com

    Last year Ireland recorded 39% of electricity from wind power at one (windy) stage. Ireland of course has some advantages in wind power since we are the windiest country in the European Union.

    Also electric charge points are currently being installed around Dublin city for electric cars (its a pilot programme so far).

  9. The social/environmental/political costs of hydrocarbons are not focused on by economists because orthodox economics views these things as not something economists should consider.

  10. Portugal’s electricity may twice that in the US, but since they use 36% of the kWh per capita, they pay lower bills than we do. The US uses about twice as much power per capita as other first world industrial nations (Germany, Japan, France, Korea, California), primarily due to inefficiency. There is a lot of variation between states of the US, with the 10 most efficient states being as efficient as other nations, but the the rest of the states being horribly inefficient. There is a far correlation between being a blue state and being efficient, and most red states of inefficient. This can be traced to fairly straight-forward policies, regulations, and incentives that increase efficiency in the blue states. It is a shame we cannot simply adopt California’s electricity policies, regulations, and incentives at the Federal level; it would almost halve our electricity consumption while improving our quality of life.

  11. I hope that someone comes up with a smarter renewable way to run cars rather than rechargeable batteries. That is hardly renewable. The batteries will take large amounts of energy to make and deplete other resources. The making hydrogen from water and burning the hydrogen for fuel seems at first glance to be more practical.
    In honor of Neal Ball,
    born 22 April 1881
    died 15 October 1957

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