Friday, July 19, 2013

Friday Links

  • The above is New York's real-time wholesale electricity prices showing the effect of the current heat wave in the North East.
  • The challenges of making changes to the US electric grid, which has over 500 owners.  This subject is really important to our ability to transition to a carbon neutral economy.
  • New startups working on energy storage options.
  • Juan Cole has some interesting thoughts on automation and globalization in the context of Detroit.
  • Finally, Paul Krugman has a column arguing that China is hitting the wall.  Some of the assertions in there I'm not too sure about.  For example, arguing that China is running out of peasants seems inconsistent with the fact that urbanization is still only 50%, versus 80%+ in developed countries.  For context, below are the GDP growth data (annual through 2010, quarterly after that).  While it's clear that China is slowing down somewhat relative to the mid 2000s peak, it's still a high growth rate by the standards of any other country.  This is far from a hard landing, at least for now.


Unknown said...

China's growth rates might be envied by other places, but will the Chinese population be happy to dial back their sky-high expectations?

Greg said...

I don't think Krugman is wrong.

It has long been predicted that China's working age population will peak in 2015. We're pretty much at the peak now; the population ages quite rapidly from here. (See China in the first chart here.)

Also, the more enterprising young have already left the farms for the cities. The median age of rural Chinese is greater than that of the urban.

Thirdly, China's system of residence permits makes it very hard for the elderly to leave rural areas.

Put those together, and you have a picture of more and more working-age people staying back in the village or moving back there to look after their aged parents.

If China wants to maintain its urbanization rate, it will have to relax its system of residence permits. It probably will, but it hasn't yet.

Also, Michael Pettis (who is well placed to observe) expects China to average 3% to 4% growth in future, with most of the growth coming from internal consumption of services.

Greg said...

Juan Cole's piece is thought-provoking (especially coming after a podcast on FT Alphaville (registration required) about robots in the next couple of decades. (iTunes link.))

However, I think that Cole is over-thinking things. Robots may be a looming risk to civilization, but they're not a present one.

At the very broadest level the situation is this. Wages, and therefore median household incomes, have been systematically suppressed for decades, both in the West and in China.

In effect, the world is missing about five trillion dollars of labor-employing demand. (The things that the super-wealthy buy don't employ many people; the things that median households buy do.)

In China household incomes are about 35% of total GDP, compared to a more usual 70%. There's $2 trillion. There's about $1T of missing demand from Europe's austerity policies since 2008. And there's at least another $2T from decades-long suppression of wage growth in the whole of the advanced world, including Japan and South Korea.

Detroit was vulnerable, but the underlying problem is not automation but a deliberately imposed policy of impoverishment.

Chieftain of Seir said...

One thing that people keep forgetting is that while China might not be as urbanized as most developed countries, it is also not as young as most third world countries.

To put it bluntly, young people move to cities, old people do not.

sunbeam said...

I read the link on the companies doing energy storage. Not very informative, not a lot of technical details.

But something I've thought for a while never gets discussed on any of the ... "energy crisis" sites (Peak Oil just doesn't seem to fit exactly anymore).

And that is the capability to transmit electrical energy long distances.

Correct me if I am wrong, but HVDC can transmit electricity over a distance of 1000 miles with 10% losses.

We also have some superconducting transmission lines rolled and rolling out now.

The superconducting lines are in their infancy but still...

Just saying what exactly stops us from having a system where wind energy from the Plains or even Alaska is used in New York?

From having solar energy from the Southwest stored in hydro facilities in Quebec (or the Northwest, etc).

To my eye we have the technology. What is required is the investment to make it happen, and to ensure that all the required parties cooperate.

Compared to our Iraq and Afghanistan boondoggles it seems like a pittance of an investment. What would it take? 100 billion? 200? 300? Even at 300 billion it's quite a bargain compared to some other massive undertakings we've blithely jumped into.

Unknown said...

"What is required is the investment to make it happen...."

Right. And that's probably not going to happen. The capital will go into attempting to maintain the status quo, not developing massive new infrastructure. My 2 cents anyway...

One other comment. Cole thinks, " They could put their energies into software creation, biotech, and artistic creativity, which are all sustainable"...

I'm going to have to beg to differ that software creation as currently incarnated is "sustainable". And Biotech? Come on, these industries need armies of super specialized workers using massive amounts of energy to keep moving. How is that sustainable? I'll agree with artistic creativity, though :P

Emil said...

The Chinese working-age population is shrinking, however. That shrinkage began last year - it was supposed to begin in 2020 according to most economists just a few years ago.

Second, Paul didn't bring up the environmental challenges, but this is probably more due to the limited space.

The environmental challenges are huge. Even if China does impose fairly significant environmental policies, the pollution will grow by 2025 because they have set in motion a huge number of coal plants(all in the name of economic growth).

They could pull back but neither nuclear nor solar will be able to meet the energy demands short term.

Doing serious environmental reforms is necessary but it would also act as a strong lock on economic growth.

Finally, Paul never defines what "hitting the wall" means. I think he's a bit dramatic in his wording.

A more plausible outcome would be to see around 4-5% growth in the twilight years of this decade and then 3-4% from 2020 onwards.

They would still pass the U.S., but it would happen a bit later.

P.S. Paul has been a skeptic of the East Asian economics a long time, he posted similar dismissives during the 1990s, but they didn't come true.

alan said...

I think this will be of interest to you.
Spain has privatized the Sun: