EUCOM Economic Analysis - Part I

[Fuchs]

Context:

The conservative-liberal (European "liberal"!) government first lengthened the projected service life of the German nuclear powerplants as a gift to the nuclear lobby (and possibly Siemens), then came Fukushima and Merkel did what she had done several times already: She completely gave up a cornerstone of her party's policies and made a u-turn. Now she's doing a more radical anti-nuclear power than did the red (social democrats) - GREEN Schrder government (which was in bed with big business just as all (West) German governments, and with much less style than their pre-'82 predecessors!) .


The switch to less nuclear power wasn't nearly as problematic as the scaremongering of the nuclear lobby had suggested for decades. We're still a net electricity exporter while the extremist pro-nuclear power France is a net importer AFAIK.

There is one major problem, though; the German electrical grid is compartmentalised. This is actually in part still a heritage from a Nazi law from the 1930's (the same Nazi law that made the German electrical grid more unable to cope with damaged powerplants than the Allies ever dared to dream prior to their 1945 Strategic Bombing Survey!).
Said old law created a landscape of regional monopolies (typical fascist-typical gift to big business in exchange for support), which were not much connected.


Now there's a lot talk about a need for additional very high voltage power lines, but planning and building such 'unpleasant' power lines is a slow process and some embarrassing power line failures two or three winters ago had already revealed that even the existing grid requires some overhaul (because the power corporations had pursued easy profit by neglecting maintenance).


The power plants are only the obvious surface; the practical issues are rather about the power line grid. We could have dozens of DESERTEC solar power plants in Africa right now, but what would that be good for if we cannot even transfer their output between North and South Germany?

[Surferbeetle]

Fuchs,

Appreciate the insights

What if the grid is no longer cost effective? What does that mean for centralized planning & control, and allocation of capital in al of it's forms?

Grid parity, by wikipedia

Grid parity is the point at which alternative means of generating electricity produces power at a levelized cost that is equal to or less than the price of purchasing power from the grid. Reaching grid parity is considered to be an important point in the development of new sources of power, the point at which it becomes a contender for widespread development without subsidy support. The term is most commonly used when discussing renewable energy sources, notably photovoltaics, wind power and wave power. It is widely believed that a wholesale shift in generation to these forms of energy will take place when they reach grid parity.

[Fuchs]

Not "cost-effective"?
How would one determine that?

The "well"-earners in the top floors of the glass palaces were simply neglecting long-term thinking.

[Surferbeetle]

At some point, perhaps sooner than later, the average user runs a cost estimate which examines the costs of a renewable set-up sufficient to power their needs versus the costs of continued purchases from the grid...cost effectiveness wins and perhaps the gird and all it's associated infrastructure & costs is downscoped in size and changes focus to primarily supporting heavy users.

Perhaps similar to the evolution of mainframes -> pc's -> smartphones

[Fuchs]

Germany has about 90% scattered light and 10% direct sun radiation on average. Only photovoltaic and direct solarthermal power works well, the reflection-requiring solar techs don't work well. The sun's radiation in Germany is overall unsatisfactory for a cost-efficient energy supply in all but single/two-family houses warm water supply and isolated installation electrical power supply. Northern Germany is even substantially worse than Southern in this regard.

Wind power is only available at some times, and only so in substantial amounts in the north.

Geothermal power is only available in probably practical quality in the very few former volcanic areas (Eifel, for example).

Water power has already been maxed out with known technologies. You really need to go for tidal or wave energy North Sea installations to find any major growth potential.

Waste burning (including waste from garbage and water filtration) is already being used, but its potential is limited to about one site per community.



This leaves energy efficiency stuff (further improved internal combustion engines, improved building insulation) and investment in solar power in more Southern countries (I'd look especially at Spain, since it has semi-arid regions) as the huge potentials for improvement.

I don't see how communities or households could seriously go down an energy autarky route.



By the way; the bio-energy wave that has hit the U.S. about a year ago; it's bullocks. We looked at that stuff long ago, and for a while.
In Germany, only the agrarian lobby still pretends to buy into this stuff, while environmentalists and the non-agrarian ministries are set against it. The pro arguments are largely con tricks.

[Surferbeetle]

Energy supply is half of the equation, the other half is energy draw...$/m2...efficiency being the holy grail on both sides.

As you point out the cost/benefit calculation is complex, will vary by location, includes such things as climate variations, seasonal variations, insulative properties of building materials, light source types, motor efficiencies, smart appliances, tax rates, property age, payback periods, cost of alternatives, etc, etc.

Anecdotal observations from my neck of the woods include friends (and companies) making good consulting fees from enacting cost savings/energy efficiency programs for a variety of organizations, as well as a sudden 'wave' of photovoltaic installations/retrofit's in my neighborhood.

The grid will not change tomorrow, however i do think about how we went from gaslight (~1524 in the West) to electrical light (~1880) over the course of three hundred some years and then made a jump from mainframes to smartphones in about fifty years...both were large conceptual jumps...when thinking about changes to the grid

[Surferbeetle]

Merkel se prpare une ventuelle victoire de Hollande
Le Monde.fr avec Reuters | 23.03.2012 20h08 Mis jour le 23.03.2012 20h12

Malgr son soutien explicite la rlection de Nicolas Sarkozy, Angela Merkel se prpare discrtement la possibilit de voir Franois Hollande accder la prsidence franaise le 6 mai. La chancelire allemande est intervenue de fait dans la campagne lectorale en France en apportant son soutien "sur tous les plans" au chef de l'Etat sortant le 6 fvrier et en refusant de rencontrer son adversaire socialiste.

Merkels Party Wins Saarland State in Show of Crisis Backing, by Brian Parkin and Tony Czuczka - Mar 25, 2012 1:37 PM MT, Bloomberg News

Merkels Christian Democratic Union took 35.2 percent in todays election to retain power in Saarland, a former coal-and- steel state that borders France and Luxembourg, preliminary results showed. The Social Democrats, the main opposition party nationally, had 30.6 percent, paving the way for a so-called grand coalition with the CDU as senior partner.

Saarland, which represented 1.2 percent of German gross domestic product in 2010, the smallest proportion of any state except the city of Bremen, held elections more than two years early after Annegret Kramp-Karrenbauer, the CDU state premier, dumped the Free Democratic Party in January out of a government that also comprised the Greens. The FDP, Merkels coalition partner at national level, got 1.2 percent in the election, well below the 5 percent threshold needed to win assembly seats.

The anti-capitalist Left Party led by Oskar Lafontaine took 16.1 percent and the Greens 5 percent. The Pirate Party, which campaigns for open internet access, had 7.4 percent, allowing it to enter a second regional parliament after winning seats last year in Berlins state assembly. While the projections showed the Social Democrats and Left with enough seats to form a coalition, Heiko Maas, the SPD state leader, ruled out such an alliance in favor of a coalition with Kramp-Karrenbauer.

Saarland sets the stage for two more state elections this year that offer the latest indication of voter sentiment in Europes largest economy. Next up is Schleswig-Holstein on May 6, then North Rhine-Westphalia, Germanys most populous state, which votes on May 13 after the government collapsed this month.

With almost a quarter of Germanys 82 million people, North Rhine-Westphalia is a bellwether for federal political fortunes. The SPD took the state from Merkels party in May 2010 in a result Merkel blamed on agreeing to a first bailout for Greece days earlier. The result deprived her of a majority in the national upper house, where states are represented, and presaged defeats or a loss of support for her coalition parties in all seven state votes in 2011.

Merkel set to allow firewall to rise, by Peter Spiegel in Saariskel, Finland, Ralph Atkins in Frankfurt and Quentin Peel in Berlin, March 25, 2012 6:47 pm, Financial Times, www.ft.com

Germany is poised to bow to international pressure and allow a temporary increase in the eurozones financial firewall this week, to prevent the crisis in the regions periphery spreading to other member states.
Officials in Berlin signalled on Sunday that the government would allow funds to be boosted as a way of calming financial market pressures.

Senior European officials said a consensus appeared to be building behind Mr Rehns mid-range option, which would allow the 440bn European Financial Stability Facility, the current temporary rescue fund, to keep running when a new permanent 500bn fund, called the European Stability Mechanism, starts up in the middle of this year.

That would boost the rescue systems overall firepower to 940bn, although with about 200bn committed to Greek, Irish and Portuguese bailouts, the total available would be 740bn.

Rumors of a LTRO for Danish Banks?

Danish Private Debt Burden Triggers Central Bank Warning, By Frances Schwartzkopff - Mar 22, 2012 8:31 AM MT, Bloomberg News

Denmarks central bank is stepping up its focus on the countrys record private debt load to ensure households dont suffer losses when interest rates start to rise, Governor Nils Bernstein said.

People who are highly indebted are more vulnerable to interest rates and can be hit hard by changes, Bernstein said in an interview in Copenhagen yesterday. The bank is now conducting a review of the risks, he said.

Households in the AAA rated nation increased their debt burdens to 310 percent of disposable incomes in 2010, the worlds highest ratio, according to Exane BNP Paribas. While the debt is backed by the worlds second-highest pension savings rate after the Netherlands, those assets are locked shut, Bernstein said. The central bank has argued that failure to address the risks may jeopardize the stability of Denmarks $470 billion mortgage bond market.

The goal is to analyze how vulnerable households are to changes in the interest rate, Bernstein said. There are certainly some who are vulnerable. What we want to know is how widespread it is and how vulnerable they are.

Denmarks central bank uses interest rates to maintain the krones peg to the euro. Bernstein lowered the benchmark lending rate to 0.7 percent in December after investors fleeing the euro regions debt crisis turned to the Nordic country, threatening to strengthen the Danish currency.

[Firn]

„Das Vertrauen in die EZB geht verloren“

Jürgen Stark war von Juni 2006 bis ende 2011 Chefvolkswirt der Europäischen Zentralbank (EZB).

Glauben Sie denn, dass diese Ausstiegsklausel eine Bank wahrnimmt?

Ich weiß es nicht. Die Europäische Zentralbank hat ja auch aktiv für die Teilnahme an dieser Operation geworben. Es sei kein Stigma für die Banken, sich mit dem günstigen Geld zu versorgen.

Ist das nicht eine Subventionierung des Finanzsektors?

Es ist die Ermöglichung sogenannter Carry Trades. Das bedeutet, die Banken erhalten Kredit zu einem Zins von einem Prozent und können in einigen Ländern Staatspapiere kaufen, die mit viereinhalb bis fünf Prozent verzinst werden.

Im Klartext: Das ist der todsichere Profit, eine Einladung an die Banken zum Geldverdienen.

Ja natürlich, sie könnten aber auch die Realwirtschaft finanzieren. Es schreibt ihnen keiner vor, wie sie das Geld verwenden.

Sind wir in eine Staatsfinanzierung eingestiegen?

Wir befinden uns in einem Teufelskreis.

I think it is highly unusual to hear such words from an European/German bureaucrat who served not long ago in such a key position of the ECB.

Wie versprochen, so gebrochen

As promised, broken.

Berlin Die Euro-Rettungspolitik von Bundeskanzlerin Angela Merkel (CDU) schürt Unmut in ihrer eigenen Koalition. Unter den Abgeordneten ist die Stimmung angesichts des Dauerzoffs zwischen Union und FDP über diverse Themen seit Monaten angekratzt. Da ist es umso problematischer, wenn wichtige Euro-Entscheidungen anstehen, die wieder einmal den Grundkonsens verletzen, einmal getroffene Beschlüsse nicht wieder in Frage zu stellen. Exakt das passiert an diesem Freitag, wenn die Euro-Finanzminister in Kopenhagen die Weichen für eine Ausdehnung des Euro-Rettungsschirms stellen werden.

The Handelsblatt clearly not being happy that Merkel agreed to raise the firewall with even more German money ( and of course much money from many other countries too).


Aktien sind viel günstiger als wichtige Staatsanleihen

26.03.2012 · Glaubt man der umstrittenen amerikanischen Investmentbank Goldman Sachs, so sind Aktien gegenüber Anleihen so attraktiv wie seit einer Generation nicht mehr.

I brought up this topic some time ago but timeo Danaos et dona ferentes so I might take another look at it

Btw I have now a lot of Greek gifts on my account with the nomial value not looking actually too bad but the true Gift in the German sense is of course the low yield.

Händel: Deh! fuggi un traditore