segunda-feira, 14 de novembro de 2011

Paul Krugman blinded by the sun

In his last column in the New York Times Paul Krugman writes about power generation and either shows his lack of knowledge or a complete biased opinion on the subject. He starts by criticizing hydraulic fracturing technology that allows the exploration of shale gas and in which the americans are probably world leaders. Robert Bryce, a renowned journalist and author about the energy business debunks Krugman's arguments and refers the wealth and jobs created through the exploration of shale gas plus the drop in gas prices. In my opinion even more importantly than the beneficts to the price stability, shale gas reorganizes the world gas reserves and that brings energy security to several countries, namely the USA and european coutries. And that is something Krugman can't ignore. The Energy Information Administration (EIA) expects that in 2035 46% of natural gas consumed in the USA will come from shale. Russian Federation and Iran alone own the best part of the conventional natural gas reserves and none can be considered the most friendly country.

Krugman thinks that hydraulic fracturing should internalize all costs associated and his right. Not only that but production of electricity with fossil fuels should pay for all the damages that it makes. If that happens nuclear power will be the cheapest way of power generation.

In the second part of the article Krugman presents solar power as the ultimate solution for power generation and explains that solar power costs follow Moore's Law. He refers this article in Scientific American magazine that says that solar power will achieve price parity with current electricity price in 2020c or early. In 2030 it will be half that price. The numbers seem very optimistic to me but they are irrelevant to Krugman's column. One cannot compare 1 kWh of solar power with 1 kWh produced in a gas powered power plant. It is like compare apples and oranges. Only solar + gas (as backup) + pumped-storage dam or batteries (for storage).

Let's imagine the (impossible) scenario of having solar power capacitiy to produce momentarily (not permanently due to intermittency) all USA power consumption. Even then USA would require exactly the same amount of gas powered power stations than in scenario of 100% gas covering the demand. Even if all this power plants could only, as a whole, be needed for one hour in a year they would have to be ready. In the solar scenario the biggest portion of income of the gas power plants would come from stand-by contracts instead of selling energy to the grid.

One doesn't need to be a Nobel prized economist to understand that solar power can only achieve price parity with natural gas when solar power can cost nothing and hydraulic pump-storage goes for free. When will it happen? Never!

If Krugman argues that fracturing should pay for its shortcomings he must also demand that solar (and wind for that matter) internalize the costs of backup and storage. That is exactly what is happening in Virginia.

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