Wind power (and how not to do it)

The government has announced a serious programme of building offshore wind farms to supply a significant proportion of our energy needs. For the first time in a political generation, this is not obviously-empty bullshit, but looks like a real announcement. So let me join with everyone else in welcoming it.

However, I must express some reservations about the plan. Apart from practical problems like engineering and maintenance (which I’m sure can be solved – eventually), there are a couple of serious problems.

The lesser of these is the inevitable law of unintended consequences. Some idiot has already described the plan as powering all the UK’s households energy by wind. So householders, anxious to massage their consciences, will tell themselves “my energy use is now sustainable”, and cease to think about constraining it. But that only really affects those few households that are doing anything more than empty tokenism in the first place.

The more serious problem is that it has no economic basis. For the time being, and perhaps throughout the construction, the immediate cost of providing this wind power exceeds that of burning hydrocarbons. So the work will be driven by government rules and incentives. History has demonstrated clearly that free markets are altogether better than command economies for efficiency and innovation. Yet here is the government, commanding let it be so.

The government understands about markets They will create a competitive market, as they have done in other areas of public expenditure, from construction projects, to weapons procurement, to schools and hospitals. So where’s the problem?

The problem is that it’s a narrow micro-market. Sure, it’ll drive efficiency and innovation in the business of building and operating offshore wind turbines. But it will do nothing for out-of-the-box “big picture” ideas: in fact, it will actively lock them out, if they don’t happen to fit neatly in the defined micro-market. That’s the same underlying straitjacket that afflicts the command-and-control economy.

I refer the reader to my sketch Alice in Business for a story of how a marketplace in a narrow sector stimulates incremental optimisations at the expense of a radical order-of-magnitude improvement.

It’s not possible at any price to clean up fossil fuels to the standards we rightly impose on the nuclear industry (one could say, the true cost would be infinite if we did). The proper way to bring in large-scale development of renewable energy is to make fossil fuels pay a more realistic cost for the damage they do.

Governments can do that through taxation: indeed, I have argued for a major reduction in taxes on individuals and companies, with the shortfall being made up by taxing destruction and use of non-replaceable resources. Adjust taxation every year, and make it clear to everyone that this will continue for as long as we are burning any fossil fuels, and suddenly the free market will drive huge investment in renewable energy, including offshore wind.

That’s the real market, where Big Ideas can compete on their merits, and not be squeezed out by narrow constraints.

A political generation ago, John Major’s government did that, albeit just in one market sector. But instead of broadening it to encompass power generation, the present government killed off his good work. While the wind power programme is welcome, it’s no substitute for stimulating the market.

Posted on December 12, 2007, in economics, energy, environment, uk. Bookmark the permalink. 1 Comment.

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