Firing Up The Economy, Literally

Guest Post by Willis Eschenbach

I’ve spent the last week in the Solomon Islands, which is northeast of Australia. It’s a wonderful place for me to come back to, even if only for a week, as I lived here for nine years. It’s a curious place, one of the UNs “LDCs”, the “Least Developed Countries.” It is the most rural country in the Pacific, with about 90% of the people still living in small scattered villages on hundreds of islands. Most people from outside the Solomon Islands have never heard about it until I say that the capital city, Honiara, is on the island of Guadalcanal.

I wrote my last post from here in the Solomon Islands, about how energy and GDP are different ways of measuring the same thing. I got to thinking about the Solomons GDP ($1,600 per year, tied for 187th out of 225 countries with countries like Chad and Tajikistan) and the energy use in the Solomons. Here’s the Solos’ energy consumption by type of fuel:

Figure 1. Energy Use by Fuel Type, Solomon Islands. Photo Source

As an aside, looking at that chart, you’d think that the Solomons should be the poster child for alternative energy. Three-quarters of the country’s energy comes from biomass, what’s not to like?

What’s not to like is trachoma and lung disease from cooking over open fires, plus lots of unburnt hydrocarbons and brown carbon from wood smoke, huge inefficiency losses, and other issues. But I digress. Looking at that graph, I was reminded that we mark the dawn of human civilization by a single act – the domestication of fire.

Fire was our first use of a concentrated energy source, our first step towards a GDP greater than what humans can do unaided. Unfortunately, for much of the Solomon Islands, it remains the only energy available in concentrated form. Three quarters of the energy used is plain old garden variety fire. In addition to household use, it provides the energy for two of the very few ways that the rural islanders can make money – copra (dried coconut meat) and cocoa. Both require heat for drying.

Now, given the general equivalency of energy consumption and GDP, what does that mean for the Solomons? It means that this lovely environmentally correct bio-fuelled country will never climb out of its poverty without more energy. Fire is not nearly enough to fuel an economy in the 20th century.

What about the petroleum fuels? What are they being used for in the Solomons? Here is the breakdown:

Figure 2. What the Fossil Fuels (diesel, petrol, natural gas, kerosene) are Used For in the Solomon Islands. Photo Source

The main thing that sticks out is that, in great contrast to the US situation, more than half of the Solomons fuel is used for transportation. This is a consequence of the way things are transported here … mostly by outboard canoe. There are perhaps a hundred miles of paved road in the entire country. Everything is moved by boats large and small. The big boats take things to the provincial centres (such as they are), and people go to buy them in their small canoes powered by outboards.

The good news in the graph is that electricity sector is 100% diesel-powered, so at least there is hope there. The islands are steep and rainfall is abundant, and there are some good hydropower sites. That means some substitution is possible.

Overall, once again we see that development in Solomon Islands is a function of energy, and that as long as they are relying on fire and a handful of petrol, they will never fire up the economy in any significant manner.

Now, I started this whole island travelogue with a very specific point in mind. It has to do with a pet peeve of mine. This is the pernicious idea that the way to solve the “energy problem” is to make fuel more expensive through taxes, so people will use less of it and become more efficient in its use. (As an aside, I don’t see the “energy problem” as being people using too much fuel, but as being people who don’t have affordable fuel. But hey, that’s just me.)

There’s two problems with that “tax our way to energy freedom” idea. First, in the Solomons, a trip from Gizo Island to Kolombagara Island in a particular boat might take, I don’t know, call it ten litres of fuel. If fuel prices go up and the operator can only afford eight litres, he’s stuck. He can’t economize and get more efficient like the theory says he’s supposed to, the outboard engine burns so much an hour. And he can’t just use the eight litres he can buy, it will leave him marooned in mid-ocean. He’s stuck in port, and out of the game.

There’s a worse problem, though. This is that taxing energy is taxing the wrong end of the production process. This slows the whole production process down before it can be started. I saw this in Honiara when fuel prices got high in 2008. For a while you couldn’t buy fish in the market of the capital city. Why? Because fuel cost too much, so it wasn’t worth it for the guys to go out fishing … and a significant chunk of the fuel price in the Solomons is taxes to the Government.

This is taxing the wrong end of the production process. Countries should tax the outputs of production (in this case the fish) and not the inputs (fuel, fishing gear, and boats). You want to encourage people to fish by making the entry cost for production inputs as low as possible.

There’s also a more subtle problem with taxing the wrong end of the production chain. Output prices are typically some multiple of the price of production. This means that adding a dollar on the input side often leads to a two dollar jump in the final price … not good.

Then, when the boats can go out and fish because the cost of inputs is low, the country should tax their output. Tax the fish in the markets. It will perhaps make the fish slightly more expensive for the customer … but at least there may be fish in the markets, instead of empty boats tied up by the markets. When the fuel prices were so high in 2008 and fish were either wildly expensive or unobtainable, the health of the kids suffered because fish is a main source of protein in the islands. That’s not a direction that I want to go.

In summary:

1. Taxing energy to force people to economize and become more efficient can be very counterproductive at the poor end of the economic spectrum. People are already using as little energy as they can possibly get away with, because from their point of view energy is already very expensive. In addition, they may not be physically able to economize or increase their efficiency.

2. If a country decides to use taxes as a (very blunt) instrument of energy policy, it should tax the outputs of production, rather than the inputs to production. This allows production to increase, instead of crippling it.

3. In the absence of often unavailable changes in efficiencies (see outboard motors above), forcing people to use less fuel through taxes means lowering the GDP. For places like the Solomon Islands, that’s the last thing we want to do, lots of folks there are way out on the economic edge already.

Finally, in the very best Solomons fashion, this is being written while I’m waiting for the departure at the airport, because the plane is two hours late. Or as they call that here in the Solos, “right on time” … wish me luck, when and if the plane arrives I’m bound back to Nowherica.


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November 17, 2010 8:03 pm

You could argue that taxing inputs to industry keeps out inefficient producers, which reduces overall consumption. OTOH, that reduces competition and stifles invention… unless you compensate for that fact with tax credits for invention.
I don’t really have a position on this issue, I’m just saying that someone could argue against you by arguing that the overall good would increase by taxing inputs.
There’s also a flaw in the logic of saying “Output prices are typically some multiple of the price of production”. this statement can’t be falsified, unless you mean there is a fixed multiplier, which is usually untrue. Output prices are driven by different markets than input prices, although the two markets communicate. A classic example would be the cost of crude oil and the cost of gasoline, which sometimes bear a resemblance to one another. However, gas prices vary by seasonal demand, refining capacity, etc.
Were fuel prices in the Solomons so high in 2008 because of taxes or because of the market? I’m not sure this story illustrates your point.

Phil's Dad
November 17, 2010 8:29 pm

– copra (dried coconut meat) and copra. Both require heat for drying.

Surfer Dave
November 17, 2010 8:37 pm

Nice article, cogent. Minor typo “- copra (dried coconut meat) and copra. Both require heat for drying.” Should that be copra and cocoa?

Phil's Dad
November 17, 2010 8:46 pm

I agree fully with the underlying premise of this piece; that some people are already barely surviving on their current energy use. They are at absolute rock bottom for energy survival. Cutting it further will kill. As you indicate 40 entire countries have even lower GDP than the Solomon Islands and already many are dying for too little energy. Putting up the price is a death sentence for many more.
(Are you on the plane yet?)

Keith Minto
November 17, 2010 8:47 pm

This idea has been around for a while, I remember a retired ANU academic floating the idea of coconut oil as a diesel substitute about a decade ago now. Any sign of this being used in the Solomon’s ?
Also in an informal economy like that, adding a tax at the market end would be difficult, cash registers are few and far between in ‘wet’ markets, it is a lot easier to tax the fuel in an unsophisticated economy.

Phil's Dad
November 17, 2010 8:52 pm

So when you said;
– copra (dried coconut meat) and copra. Both require heat for drying.
did you mean – copra (dried coconut meat) and cocoa?.

Phil's Dad
November 17, 2010 8:52 pm

Time delay – ingnore my last.

Phil's Dad
November 17, 2010 8:57 pm

“it is a lot easier to tax the fuel in an unsophisticated economy.”
Easier doesn’t make it right Mr Minto.

November 17, 2010 9:31 pm

JDN/Willis, typical in most service businesses, i.e. plumbing, electrical, etc. with employees, you base your hourly charge among other things, that most of the time your employee is only providing 5 hours of billable time for every 8 hour shift. kinda like your fishing without success willis. All costs have to go into your final price.

Harry Eagar
November 17, 2010 10:00 pm

One of your better essays. I immediately wondered about hydro, and I see you say there are possibilities there.
Very limited, I would guess. The terrain is so rugged that it would cost a fortune to move electricity out of one valley to another, so efficiencies of scale are going to be hard to come by.
Some very small generators are called for, what a friend of mine who works with poor farmers in Africa calls ‘Joe-tech,’ the kind of stuff Joe can make in his garage.

Ralph B
November 17, 2010 10:08 pm

On the subject of coconut oil for fuel…just some numbers
it takes about 10,000 nuts to produce 1MT (metric ton) of oil. There are about 1082 liters in a MT. market value is about $1450/MT or $1.34/liter
You can burn pure coconut oil in a diesel engine, but maintenance costs are going to be higher. You can make bio-diesel but really is it worth it? In most cases you loose money by burning the oil for fuel.
The islanders are selling copra and my guess would be they get about 1 cent per nut equivalent.

November 17, 2010 10:11 pm

Interesting post, thanks.
I must admit, from what I know of the history of the 19th century (and I’m a recognized expert on a wee small bit of it), I’m not entirely convinced that global dimming didn’t play a major role in hiding/slowing global recovery from the Little Ice Age.
If you look at major urban centers like London, Pittsburgh, St. Louis, etc in that period, what you see is a dark brown haze from unfiltered wood/coal burning constantly present. An awful lot of diagnosed “tuberculosis”, sent to Arizona or the mountains or other “clean air” locales for “the cure” was actually likely to be particulate-based rather than true tuberculosis.
Of course, world population wasn’t nearly as great at the time, and one has to take that into account as well. But then the filtering was pretty well non-existant. . . .

November 17, 2010 10:14 pm

A fish (or any commodity) is only worth what the customer will pay for it. Primary producers everywhere rarely have any control over selling price. Therefore the old cost/price squeeze- increased costs/taxes can’t always be passed on to the consumer, local producer goes out of business, commodity must be bought from somewhere else or done without, everybody loses. And people will die earlier.

November 17, 2010 10:27 pm

I’m sometimes accused of being indirect. So, if it wasn’t clear from my above. . . if recovery from the Little Ice Age was delayed by 19th century fuel practices, then that has implications for the trend line, and attribution to causation thereof, above and beyond that commonly attributed to “clean air” legislation of the 1970s. . .

Grey Lensman
November 17, 2010 10:29 pm

How many acres of sugar cane do they have to grow to produce ethanol for all their outboards. This produces work for farmers, work for process people and work for fuel sellers. Cuts the imports of fuel and utilises a resource that they have.

Rational Debate
November 17, 2010 10:42 pm

Hi Willis,
Back in the early 90’s, roughly, I was at an American Nuclear Society annual meeting. A senator was one of the keynote speakers, and it’s driving me crazy because his name is on the tip of my tongue but I cannot quite seem to get it out… started with an “M” I’m pretty sure – would know it in a heartbeat if I heard/saw it.
Anyhow, he had an awesome presentation – cogent, thought provoking, unexpected, concise yet tons of hard well referenced facts, etc – that really highlighted just what impact cheap, plentiful energy has world wide. I can’t tell you how many times in the years since I’ve wished I had a copy of that presentation, or how many times I’ve referred to various aspects of it. It had several different charts, all showing how various key human parameters changed as a function of either the amount of energy available or the cost of energy available to a nation. The more cheap energy available, the higher the GDP, the lower the birth rate, the higher the standard of living, the lower infant mortality, the longer average lifespan (I think that was one), the better the air quality, the lower pollution levels were in general, the better the water quality, the higher the standards of sanitation, and on and on. Shoot, if you think about it, what nations are able to really do a LOT of all sorts of environmental protection “green” types of activities? Those that have a lot of cheap abundant energy available to them so they actually have leisure time and disposable funds available to devote to it. Who doesn’t pursue “green” issues? Those who don’t have or can’t afford the energy to power tools, build things, drill wells or otherwise provide good clean water…. in other words, those who are forced to scrambling like mad all the time just to try to scratch out bare survival.
It has always seemed to me that very very few people think of these things in terms of energy cost and availability – and yet with abundant affordable energy available, you can do almost anything, make almost anything happen. Most of us in the ‘developed’ nations really badly take energy for granted and don’t begin to realize the massively beneficial domino effect it has throughout societies and for all mankind.
I really would dearly love to have a copy of that presentation!

November 17, 2010 11:03 pm

“This is taxing the wrong end of the production process. Countries should tax the outputs of production ”
Denmark is taxing the hell out of El – input about 250% + 25% (VAT) – output 25% (VAT)
..and the taxes is on the rise of cause , gotta finance them windmillså-el-2010-2015.aspx
øre/kwt = 0,18 cent/kwt – ad 25% VAT

Malaga View
November 17, 2010 11:08 pm

This is that taxing energy is taxing the wrong end of the production process. This slows the whole production process down before it can be started.

This is 100% correct… this is how small government suppress developing economies… and how big government slowly strangle developed economies.
The black art of Keynesian Economics practiced by big government is really very sadistic… it is about torturing and strangling the economy to the point of subjugation.
Personally, I do not endorse (via the ballot box) any politician who supports big government… and you really know how bad it has got when big government replace ballot boxes with voting machines.

November 17, 2010 11:19 pm

I’m not an expert on the Solomons but given that they are islands I would be asking just how much scope there is for increasing GDP? If there are few resources and few people there probably is not. If there us no money to buy fuel, irrespective of taxes, there is no prospect.
I’ll also make a wild guess that the economy is heavily foreign aid dependent, in other words other people’s taxes.
When climate naysayers talk about enthusiatically about adaptation maybe the condition of the Solomons is what is meant.

November 17, 2010 11:24 pm

The simplest explanation i’ve ever read, and perfectly sensible. Keep it simple.
Why then do we allow governments to (over) tax fuel? When we know they’re reaping the $1 fuel tax AND the GST/VAT on the end product?
They’re ripping us off … very clearly, but as you show, it’s against everyone’s best interests.

Don V
November 17, 2010 11:26 pm

I enjoy reading your posts Willis, because I always come away THINKING.
I agree with most of your premise concerning taxing the wrong end of the supply chain, but would like to drive the point home a little harder. First let me take a stand and disagree on one point. The taxation you seem to be arguing for is aimed squarely at “improving” society by direct financial intervention – taxing a commodity to discourage it’s use. I believe that taxes ought to be used by government only to protect and provide for the civil well-being of a society. Intervention (ie. providing financial incentive, wealth redistribution, or any other social engineering/entitlement program) rarely ever achieves “the greater good” that it’s proponents first intended.
That being said, lets think your premise through a little further. Your premise is that taxing the use of fuel squeezes the balloon on the wrong end and leads to an unintended consequence. To wit, the Solomons goverment taxation of fuel doesn’t “improve” the islanders lot in life because it creates a disincentive where there ought to be an incentive. To this engineer, improve = optimize = achieve highest yield or highest efficiency/greatest good for the most citizens. In order to promote the highest efficiency while simultaneously improving the environment and the health of its citizens, each source of energy needs to be rated as to both its efficiency for achieving productivity as well as its costs (production, environmental impact, health impact).
For example cow dung is not a very efficient source of energy for transportation, heating ones home, or cooking with. Furthermore, while it is quite cheap, it has low energy content/unit mass and a highly negative health impact when handled improperly, inefficiently burned or left out on the streets. Diesel fuel on the other hand can be quite efficient as a source of productivity improvement for transportation, heating and with the proper catalyst even when used to cook with. It may not be as inexpensive as cow dung to manufacture out in a remote rural village, but it has much higher energy/unit mass (ie. lower transportation cost), and when burned properly, has less of a negative health or environmental impact.
To drive your point home further then, if government is going to use taxation to engage in social engineering, (again, I disdain this role of government) I would suggest that we take the premise that wise government ought to use taxation as both a disincentive for energy use that is inefficient and unhealthy, and as an incentive to improve efficiency, as well as environmental and health impact. In the Solomons, would it not make sense then to give each form of energy being used a “tax rating”; each energy consuming ‘engine’ a “tax rating”. To disencentivize (is that a word?) the use of cow dung, wood and copra to make products, heat homes and cook with, products made using these sources of energy, homes heated with them, and citizens using them to cook with ought to be taxed at a higher rate. As an example of using taxation to incentivize the improvement of efficient use of energy, fishermen who invest in the latest generation of high efficiency outboard motors, ought to receive tax refunds and be allowed to charge lower taxes on the fish they sell. The tax man who comes through a village and collects huge taxes from those villagers who are cooking on open wood fires, will have a terrible go of it, unless he can simultaneously teach those same villagers that they will pay much less if they purchase kerosene stoves or collectively petition the rural government to assist them in electrifying their village.
My points: Taxation shouldn’t be used at all to “engineer” a society’s energy choices. But if you insist, then yes tax the end products, but do so by taxing to encourage the improvement of efficiency and health for all using both taxes (disincentive) and incentives.

Rational Debate
November 17, 2010 11:38 pm

re post by: Grey Lensman says: November 17, 2010 at 10:29 pm
“How many acres of sugar cane do they have to grow to produce ethanol for all their outboards. This produces work for farmers, work for process people and work for fuel sellers. Cuts the imports of fuel and utilises a resource that they have.”
Ah, Grey Lensman, your logic has a wiff of the broken window fallacy to it. To borrow from Wikipedia:

The parable
Bastiat’s original parable of the broken window from Ce qu’on voit et ce qu’on ne voit pas (1850):
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—”It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.[1][2]
The fallacy of the onlookers is that they considered only the positive effects for the glazier and those he may now purchase from without considering the equally harmful effects for the shopkeeper and those he now cannot purchase from.
The implications of the fallacy can also be extended to the glazier. The onlookers assume that this needed window will have a positive effect for the glazier, but in order to assume this, the glazier must have time and supplies available which currently have no other use. If the glazier has other jobs which demand his time and supplies, this additional job now represents a negative constraint for the glazier in that he may not be able complete his other jobs on time.
In short, the broken window (and the boy who broke it) did not provide any net benefit to the town, but rather made the town poorer by at least the value of one window, if not more.

So, as to your comment about growing sugar cane, a most labor intensive job I gather, to convert to ethanol…. assuming they even have the ability/capital for the facilities to convert to ethanol… So how about if we compare that to the ‘evils’ of importing a fuel source, and applying the broken window fallacy to the entire concept.
First, let’s consider just a few facets of the ‘grow sugar cane/produce ethanol’ side of things. Just having work for work’s sake isn’t a very good idea, as shown in the broken window fallacy parable. Not unless the only other alternative is sitting around doing nothing. Consider also the increased engine damage the hydrophillic ethanol will cause to the outboards, thus requiring them to be need costly repairs more often or even be replaced more frequently? Not to mention that the engines will get less gas mileage also.
If, on the other hand, one could import fuel for the motors instead, at, say, a quarter of the cost of locally produced sugar cane ethanol, and maybe a tenth the labor, then there would be vastly more ability of all involved to pursue more productive tasks, resulting in a far better long term outcome. Consider also what better uses the land that would have been required for sugar cane could be put to. Perhaps other agricultural uses that provide the islander’s with a more healthy and varied diet. Maybe those freed from the sugar cane/ethanol project could then build a much needed hospital instead, or build sturdier homes that wind up saving lives during storms. Or with the extra funds now available, send someone off to learn to be a doctor or dentist for the islands, or some could start up an ecotourism business while others branched out into any number of different useful occupations, open new businesses, service industries, manufacturing – the possibilities are endless.
Results all the way around, assuming that fuel sources can be imported cheaper than being made from local resources such as sugar cane ethanol? Higher GDP, higher standards of living, more growth for the community, and so on. Just because one can perhaps do something with local resources doesn’t in many cases mean it’s actually a beneficial thing to do.

Rational Debate
November 17, 2010 11:51 pm

Willis, I’m curious if you’ve ever watched the TV program “Deadliest Catch?” A documentary series chronicling the real-life high-sea adventures of the Alaskan crab fishermen. This is the most deadly profession in the world. If you’ve never seen it, you might really enjoy catching a few episodes – both in terms of the economic aspects, and the comparison to the fishing conditions you’re used to in the Solomans! You can ‘cheat’ and watch online if you like at: Each episode takes you out with a group of boats, shows you what problems each encounters, the different strategies employed, and the final results – including injuries and the financial breakdown on return for each crew. Its pretty amazing.

Rational Debate
November 18, 2010 12:00 am

Willis, I’m curious – for electricity, has geothermal been considered also? You’ve a good bit of active volcanic activity there, right?

Grey Lensman
November 18, 2010 12:09 am

coconut oil as a fuel is a no no, much more valuable and healthy as a food. Jatropha is another good option, gives a diesel you can use without further processing.
Run of flow high efficiency turbines with smart alternators are a good option for mountain rivers.
Key is to get the local production of transport fuels up and generate as much power as possible cheaply and get all the citizens on the net free of charge. Then they can tap the global knowledge pool to make even further advances whilst maintaining their lifestyle.

November 18, 2010 12:27 am

Willis Eschenbach says:
November 17, 2010 at 8:58 pm
in the capital, where there is a market, the economics don’t work. Palm oil is cheaper here than coconut oil, but the local palm oil plantation still buys diesel to burn in their processing plant. They looked at burning some of the palm oil … too expensive.

Nice article Willis. Great climatologist, budding economic theorist. Shall we just vote you in as benevolent dictator now? 😉
I can think of some possible reasons why this mght be so, perhaps you can eliminate them for us.
Is it too expensive for the processing plant to use palm oil because of the cost of initial investment in converting to palm oil?
Is there a shortage of palm oil supply because local palm oil use is subsidized but limited because palm oil is an export commodity the government values as a source of foreign exchange currency?
Herr Diesel himself proposed using palm oil instead of mineral oil in his diesel engines. He was found floating face down in the English Channel. Nobody is too sure whether it was Big Oil or the secret services who offed him. 🙂

Grey Lensman
November 18, 2010 12:48 am

Seems that Rational Debate is anything but. A whole load of words and window p[anes to say nothing. Growing sugar cane and harvesting it is easy. Making it into ethanol is even easier, ask any American bootlegger and the Salomon Islanders are familiar with it. Indeed I find it very sad that such a nasty diatribe can be directed at a simple and practical observation.
The Salomon Islanders are not worried about global warming or global economics. They are worried about jobs, about fish about how to improve their lot.
I forgot, maybe Geothermal would be a good suggestion for them. That can be done cheaply as well.

John Marshall
November 18, 2010 2:10 am

I agree!
It has been shown that as a population develops so birth rate falls. This is important in a country like the Solomons because they could be considered isolated and reliant on local energy sources which will run out as population increases, Trees take a finite time to grow so biofuel is not a good renewable in their situation. (Or any situation to my mind).
In fact renewable energy is an oxymoron based on the first law of Thermodynamics.
Instead of telling third world peoples that they must stay in their squalor to save the planet, which James Cameron (Avatar producer) hypocritically tells them, we should help them into a more developed society. This will also help lower terrorist threat because these people will then have more to loose.

November 18, 2010 2:10 am

“2. If a country decides to use taxes as a (very blunt) instrument of energy policy, it should tax the outputs of production, rather than the inputs to production. This allows production to increase, instead of crippling it.
And then there are those countries that tax the inputs, tax the outputs, tax the income leftover in the middle of the inputs and outputs, and tax the estate after death.

November 18, 2010 2:16 am

Willis, Your clear and direct observations in this post proves again how stupid us Humans can be. The profile of the Solomon Islands appears to be the idealised profile that the UN, Greenpeace and the WWF wants the world to conform to. My forefathers in the UK were rural tribesmen; my long family histories tell me just how grim their their battle for survival in a wood and peat-fired economy was and how short their lifespans; no sensible person would want to return to that.
Your analogy of taxing the fishermen’s fuel is amply demonstrated in the UK right now, where those in control are effectively taxing sources of energy mercilessly, such as petrol and deisel, then wondering why the economy is barely moving. Sequestering our money (tax) in windpower as a source of energy is as sensible as burying that money in a hole in the ground; the UK government focusing on the banks as being the cause of the slow economy for not lending money to small traders and manufacturers to finance their businesses seems to me to be a diversion rather than a rational argument. I guess the natural urge of government everywhere is to impose measures which do more harm than good, thus worsening a situation they are attempting to improve. Somehow, humanity needs to free itself from the shackles of Statism and be free to make our own choices again. I learnt early in my career in education that kids will learn very rapidly and well when they are responsible for their own learning and guided toward making important discoveries for themselves. Overprotecting them and spoonfeeding information to them is wildly counterproductive.

November 18, 2010 2:27 am

Fossil fuel energy is only going to be getting more expensive, regardless of taxation (unless it’s subsidised) because the low hanging fruit has been had. The investment in ‘longer ladders’ every year has to go on the price of the fruit. Course if we’re just talking about tax policy, that’s fine, but it won’t address the underlying cost increase issue.
I can’t see how the Solomon people can make imported fuel (or any imports) cheaper. They can make imports more affordable, by raising their GDP, but do they have resources to exploit? Seems to me the only reason 1st world countries are developed, is because they exploited their own, and then other countries resources.
I can’t offer any economic solutions to aid Solomon development. But I think some issues could be helped in the short term:
“What’s not to like is trachoma and lung disease from cooking over open fires, plus lots of unburnt hydrocarbons and brown carbon from wood smoke, huge inefficiency losses,”
Seems the issues with open fires could be addressed with a little education, low cost rocket stoves, and maybe low cost evaporation coolers for those without power.

Alex the skeptic
November 18, 2010 2:28 am

There are two ways to eliminate the poor from the face of the earth.
Method 1: Provide cheap energy to the poor.
Method 2: Make the very poor even poorer and let them die of hunger by making energy more expensive, thus pushing down another layer of poor human beings into extreme poverty, and let them die of hunger….. repeat the process until the global population goes down to below a billion.
Method 2 is the preferred method by those who preach that the planet cannot take more than a billion humans. Is this a revised version of the Holdren-Ehrlich population-killing formula?
Intentionally or not, this process may have already commenced.

November 18, 2010 2:32 am

Grey Lensman says:
November 18, 2010 at 12:48 am
Making …ethanol is even easier
Geothermal would be a good suggestion for them. That can be done cheaply as well.
Fuel grade ethanol is not easy to make. Even triple distillation only produces ~96% pure, not a good enough purity level especially as this alcohol will also absorb water from the atmosphere.
Volcanic areas are not necessarily good geothermal areas. In my experience (in NZ) the geothermal areas are reasonably remote from the active volcanic zones. Nor is geothermal cheap for a financially limited country. A new geothermal station was recently opened just up the road from me, 100 MW for NZ$300 million. I would doubt that this cost included the cost of surveying the geothermal field as this was done in the 1940/50’s.
Compared to the cost of a proposed wind farm on the Waikato coast, this $300 million is cheap, although I am unable to understand the published figures: 150 turbines giving 540 MW (presumably under optimum conditions i.e. rarely) for $1.2 Billion. Do ~4MW wind turbines even exist?

Grey Lensman
November 18, 2010 2:45 am

Alexander K puts it very well
The profile of the Solomon Islands appears to be the idealised profile that the UN, Greenpeace and the WWF wants the world to conform to.
The reality is Islanders are not interested or able to undertake usd 50 million projects such as high tech ethanol refineries manufactured in the USA. They want and need simple cheap and cheerful solution that work in the local environment. Say USD 5 million the can afford. After all is that not the function of the IMF or the World Bank or the UN Development fund and hundreds of other green funds. Well the operative word is not. They refer to enforce the USD 50 million route, secured on mortgages of the land and work of the people.
I look at all the academic studies done in the region. Nor one, despite finding some interesting and practical solutions, is applied, but instead sits moldering in a library or internet file.
What these people need is simple help and direction and some of the gravy train, they will do the rest.

November 18, 2010 3:05 am

I’ve just returned from a 2 year assignment in the Solomons, been back in civilisation for 3 weeks.
Willis doesn’t go as far as I know he could in describing the conditions there.
I lived in a village on the outskirts of Honiara, we didn’ t have electricity, water supply, if you wanted to go to the market of Honiara you walked because there were no roads for nearly 8 kilometres, before we got to Mount Austin. If your children got sick, you waited, and waited, then if they were almost at deaths door, you took them to #9, which when I left, had a 80% child mortality rate, due to the fact that everyone either waited too long, or couldn’t afford to get them there sooner.
Malaria is endemic, on a good week I would have half my work crew away with Malaria, on a bad week, I would be working on my own
The price of fish in both markets, Central and Kukum Fish Market fluctuated from a low of SBD$10 per pound to $40 per pound depending on the price of fuel, the weather, and the amount of catch, over the 2 years I was there.
meat, as mutton, lamb., beef, pork, runs at SBD$30 per lb for mince beef, a 6 pack of sausages will cost between SBD $30 and SBD$45.
We paid our crew SBD$250 per week which for Honiara is a good wage by local standards.
When I left SBD$100 = US$12, NZ$17, AUD$14,
Very few of the people that live in Honiara or Auki have electricity to their homes, due to the cost, there is a diesel surcharge of I think from memory, SBD$1.85 per KwH, supply is SBD$3.90 per KwH, please check those figures, I never had to pay them as I wasn’t hooked up, but I remember those (or close) being quoted to me from another aid worker.
There are 3 diesel generators supplying Honiara with electricity, all in various stages of disrepair, it was not infrequent to have power outages in Honiara for several days in a row, or black outs for several hours each day due to the generators failing. Most businesses in Honiara have back up genrators on standby, embassies, consuls, commissions etc.
The Solomons are heavily aid dependent, and the government is pushing the AGW line as much as it can, aided by the British High Commission, which has pushed their own version of Al Gores dvd on schools throughout the Solomons.
There is no hope at present of getting any form of bio fuel program in place due to the fact that 95% of the people there are involved with producing enough food just to survive, to take productive land and put it into bio fuel would cause starvation, and destroy what little rural economy exists now.
All land outside of Honiara is owned through the wantok system, tribal, family, and affiliates, to change it to another form will take several years, due to the mishaps, and misfortunes that have have occurred already with outside mining companies, mineral prospecting, and forestry destroying the villages incomes, production and sustanability.
There may be a place for Geo thermal, but as there are very few active geothermal islands, Savo being the main one closest to Honiara, and seperated by Iron Bottom sound, and an major earthquake fault line, it is hard to envisage any form of geo thermal working.
When I left 3 weeks ago, the intial stages for a hydro generating capability had been approved for East Guadacanal, the actual construction is still 5 years away at least due to the number of land owners, tribes and wantok claiming rights on the area selected.
Taxing and increasing the cost of fuel puts development further out of the reach of everyone there, there is continual forest and habitat destruction because that is the only fuel most of the people have to cook with, and their main cooking method is an umu, heating rocks with fire, then cooking on top of the rocks.
I could go on and on and on, as Willis no doubt knows, my continual source of frustration over the past 2 years has been reading internet exchanges from people who have not lived there, telling me how growing sugar cane, sugar beet, bio fuel, doing this that or the other, will solve everything, and that is without getting involved with the wind farms and solar panel election bribes that the politicians use every 4 years.
If you want to see how the world would look if we keep increasing the cost of electricity, go and live in the Solomons.

November 18, 2010 3:23 am

It’s quite possible to tax inputs to the point where the common use of such inputs makes much consequent production uneconomic, just as it is to envisage output taxes doing the same. It’s all to do with the value of the marginal physical product of labour and when that is relatively low(ie because of the dire lack of productivity raising capital associated with it), it only needs a mild level of any taxation along the production to market chain to hammer labour into very localised, subsistence pursuits, thereby further limiting the breadth and depth of market returns to labour. It is only by creation of a surplus (ie real saving and capital investment) that the value of the marginal physical product of labour can ultimately be increased. Taxing production at any stage and applying that to communal investment may or may not be more effective in lifting productivity vis a vis private decision-making, but that will largely depend on the calibre of the institutions and those who fill them. Why have some cultures produced better public institutions in that regard is an interminable conundrum.
As for an abject abhorrence to ‘engineering’ change through the application of taxation, that is a rather naive view of complex, developed industrial societies like ours. IMO it is the great presumptuous failing of libertarian, free market adherents to believe that our current taxation paradigm is somehow sacrosanct and doesn’t already ‘engineer’ our socioeconomic outcomes in quite profound ways. Indeed it is that smug hubris on the market side of politics which I believe has been its great undoing of late and allowed the socialist grand planners to again aspire to the commanding heights in the name of the environment. In that regard I’m a market green and can easily envisage another ‘free’ marketplace paradigm far different from the one we’ve ‘engineered’ now. Make no mistake, the left understand the failings of that current science of muddling through and have tapped into that underlying disquiet for their own nefarious ends. You need to understand that AGW wasn’t believed for the true science behind it but rather because it struck a deep environmental chord with the general populace and that hasn’t gone away with a few EAU emails and a bloody nose at Copenhagen.

November 18, 2010 3:25 am

JDN. Production price is what most accountants would call “cost of production” or simply “cost”. Output price is what most call “selling price”. A business will always have selling price equal to a multiplier of cost. Even before computers when all we had was an abacus or fingers. If the multiplier is one or less then it’s called “bankruptcy”. What you’re referring to is consumer (ultimately) demand-supply as a driver of prices. You also ignore competition.
The fact remains, however, that you won’t be producing if your price multiplier is less one or less than cost. Only then can you assess demand-supply and the next step is whether you can beat the competition on price. If not price, then quality. If not quality, then you pray demand far exceeds supply. Then, along the way, you need to factor in all the various risk items from earthquakes, floods, etc., including the fisherman that fails to find fish.
Picking one economic component of private capitalism makes for an interesting argument but doesn’t really present the entire picture. Consider this:
“Energy is live. Cheap energy is prosperity.”
Someone tell me that’s false?

Grey Lensman
November 18, 2010 3:40 am

Richard nice points. NZ 300 million bet they could have done it for NZ 100. Just look at the turbine hose, a large garden shed would do not an art gallery.
The you add “but thats cheap compared to the wind farm’. I bet it is and it provides constant base load as well.
With geothermal its getting the heat at lowest cost following ALARP principles. Just compare the scantlings of the first iron bridges with those built now. Go for it but distribute the heat sources to minimise risk
Regarding total costing, work for a few years in an Asian context and you learn how to build low cost. Not cutting corners or relying on cheap labour, just getting the job done without braking the bank.
When you start with poor people, their expectations are small and their bank balance even smaller. So you need to sart with
“How can we do it”
Then go from there.

Grey Lensman
November 18, 2010 3:47 am

Is this the plant
Look interesting and so much better than wind
But they need to get the costs down

November 18, 2010 4:16 am

One rationale for taxing fossil fuels is to price in the negative externalities. Burning fossil fuels causes global warming, raises sea levels and threatens the lives and wellbeing of islanders, or so the theory goes.
What would happen if each and every Solomon Islands Dollar collected in fuel taxes was used to build dikes to hold back the onrushing ocean? Little tiny dikes.
Who will have their picture taken at that ribbon cutting ceremony?

David, UK
November 18, 2010 4:38 am

Excellent post – but can we please stop the incorrect use of the word “literally?” It’s one of my pet hates!

Henry chance
November 18, 2010 5:09 am

Brew ethanol for the outboard motors. Then you can buy a new motor. Ethanol blends are bad on outboard motors.
The intellectuals always have solutions that hurt the people they claim to help.

James Sexton
November 18, 2010 5:17 am

Willis, a question. Are your thoughts on energy and economy now just being developed or are you simply expressing thoughts already cemented in your mind? It seems by your writings, a veil is being lifted as you write, and its nice to see.
An old thought…….I’ve never once seen an economy taxed to prosperity.
Currently, in the U.S., class envy is the singular most causative issue in keeping the economy in the doldrums. Much more to say, but late for work!

Ken Harvey
November 18, 2010 5:18 am

Grey Lensman says:
November 17, 2010 at 10:29 pm
‘How many acres of sugar cane do they have to grow to produce ethanol for all their outboards. This produces work for farmers, work for process people and work for fuel sellers. Cuts the imports of fuel and utilises a resource that they have.’
To grow cane for ethanol production there are two essential inputs. A subsidy from Government to make it economic and a lot of ammonium nitrate to make the cane produce enough sugar. (Enough power and water availability to make irrigation possible would also be nice). Production of AN requires a lot of electrical generating power. In Zimbabwe in the early eighties, when electricity capacity was still ample, ethanol was produced from cane and added to petrol (gasoline) at a nominal 16%. This was not to lessen costs, which is totally impossible, but to save a small element of scarce foreign currency reserves. This produced high octane, lead free fuel, at a price. The nominal permissible percentage was abused periodically and as it crept over the 20% mark one’s car stunk from twenty feet away and in the hot sun the vehicle was prone to stall due to the fuel evaporating in the carburetter. For a couple of years I rode around with a heavy hammer by my side with which to smack the top of the carb. to free the float.
We rarely hear from farmers on this site. I would like to hear from one who can argue that it is possible, somewhere on this planet, to grow sugar for ethanol without benefit of subsidy. Substitute maize for cane if you like, but that worsens the numbers. For those who do not like economic conundrums, take a look at the energy in energy out equations.

November 18, 2010 5:51 am

Willis, I missed this article and instead made a few inane comments on others that deserved it much less! I totally agree with your analysis that energy and GDP appear to be two flip sides of the same thing. They may not be identical but then there are many various measure of GDP which are not identical – even money has many definitions even within one economy (do you include just cash, near cash like bank accounts, or items like bonds which are replaceable by cash – until you have a banking crisis!)
However, the point you were making is that economic growth (aka prosperity) necessitates growth in energy consumption. I would like to explain why this is necessary.
We in a slave society
Yes! We are a slave owning society, except those slaves are not like the Roman or American slave: human! The slaves we have in our society eat carbon, they are the cars which move us from place to place instead of carrying us on seats through the city, they are the TVs which provide the entertainment instead of throwing slaves to the lions for fun. They are the tractors which dig the fields, the ships which travel the oceans instead of galleys.
We are a slave society in which I guess something like 9/10 “people” do not eat food … these mechanical slaves eat fossil fuels.
That fact we can run a society where 90% of the work is done by slaves who do not compete with the “masters” for food, means that an awful lot of people can get an awful lot of work done to allow an awful lot of us to live in the kind of luxury only the most opulent in Roman society could dream of.
Once you understand that GDP as a measure of opulence, is really a measure of the amount of work being done by none-human agencies in society so that on average we humans have to do less and less percentage of the real work leaving the rest to the fossil-eating machines, you start to understand why GDP rises as a consequence of more and more consumption of fossil fuel.
You can’t run tractors, cars, diggers, computer servers etc. etc. without energy and the more work you want from non-humans the more you need fossil fuel.
In historic terms, this is very much like a small country like Rome taking over more and more client states wherein they have slaves to provide the resources to feed back to the Romans and maintain the “masters” in a state of luxury at the expense of many many “slave” societies controlled by Rome.
That is why we must try understand human development using a new terminology which understands the basic energetics of our economy, or as I term it: enerconomics. To put it simply: enerconomics is the use of scientific terms like joules to describe the size of an economy in a way that can be applied to any economy at any time irrespective of the form of money or other value system in place. As energy is conserved, there is no inflation, so obviously you can compare historical societies with modern in a totally transparent way without having to apply arbitrary rules about the inflation rate.

don penman
November 18, 2010 6:01 am

I do not see how taxing diesel use can be blamed on Keynesian economics.Economists today see taxation as a way of restricting things that have a negative impact on society,I don’t agree with these taxes.I think that people should be taxed on their income and not what they spend and a democratically elected government should decide what these taxes are spent on, I realise that the people in the Solomon islands are poor and might rely on foreign aid to advance their lifestyle and I have no problem helping to pay for that.

November 18, 2010 6:04 am

Sorry willis: I should add that obviously in an enerconomic analysis you have to treat food energy consumption as being equal to fossil fuel or any other fuel including wind and wood.
Also, it should be pretty obvious, but you have to track the entire energy in e.g. producing an item including energy consumed by those involved in its production, the costs of producing materials like steel, the costs of transport.
The inference would be that the market price of any good is proportional to the total energy consumption related to its production, although it would a lot safer to talk about overall systems as in: the total energy consumed by an economy is proportional to GDP.

Dave Springer
November 18, 2010 6:15 am

On a happiness scale of 1-10 where one is very unhappy and ten is very happy how would you rate the average native inhabitant of the Solomon Islands? Then compare that to places in America that you’ve lived.
I’ve never really lived for a long time anywhere outside the U.S. but inside the U.S. I’ve lived in both poverty (which is of course a relative term because U.S. poverty is nothing like third world poverty) and plenty. It’s a tired old cliche but I’ve found that “money can’t buy happiness” is a basic truth at least in the U.S. If anything it might even have the opposite effect. It’s difficult to measure happiness objectively and directly but I think the reciprocal of suicide rate is a good proxy.
If you haven’t looked before check this out:
There are no surprises there for me but that’s only because this isn’t the first time I’ve looked into the question of whether happiness is correlated to per capita income.
Take a good look at it and see if you can see any correlation between income and happiness. I sure can’t.

Grey Lensman
November 18, 2010 6:17 am

I am keeping on point with Willis re the energy/GDP equation and how it effects the Solomon Islands and how they can practically address it. Here are two conflicting stories on the Biofuel deebate
For the Islander the scientific debate means little. If he can grow it and reap an income, he is happy. Sugar cane clones and hybrids with allied organic technology can increase yields substantially and require little or no fertilizers. You can argue till the cows come home re subsidies hidden or not. The question is “does it work”
An American with his prized mercury outboard would be horrified how the third world treats an operates his pride and joy. A bit of tinkering and they will work well on ethanol mixes.

James Goneaux
November 18, 2010 6:39 am

My folks (retired a few decades now) use a combination of wood and oil for heat (not at the same time, of course…).
If anyone gets the idea of raising taxes on the oil and taking a bigger chunk out of their very, very fixed income, well, they have 100 acres of northern Canadian woodland to help lower the oil to wood ratio (and heating cost). Although, of course, there are rumblings that woodlots will also be taxed. Nice.
I can’t imagine that burning more wood is doing much to lower carbon emissions, though. Not sure if this is the intent, but it certainly would be the consequence.
Then again, they can’t be that smart, they aren’t climatologists, after all.

November 18, 2010 7:19 am

Dave Springer says: “It’s difficult to measure happiness objectively and directly but I think the reciprocal of suicide rate is a good proxy.
Well how would you respond to the fact that of the 180 or so countries listed, each and everyone has a higher rate of suicide by males (except one where the rate is 0.0 which looks like an error)
What are we to draw from this figure?
a) Men are much less happy than women?
b) That for all the talk of sex equality no one cares that men are a lot less happy than women?
c) That men die earlier, so why on earth should anyone care if they give nature a hand?

Malaga View
November 18, 2010 7:35 am

Warren says:
November 18, 2010 at 3:05 am

Well said… and well written… thank you.

Bernd Felsche
November 18, 2010 7:47 am

If they want to produce at least some of their own fuel, without sacrificing precious land, then they could close off a few shallow atolls/ tidal lagoons (the region around Vonavona and Kohinggo Islands looks promising from satellite pics.) to form ponds in which to produce oil from algae. Depending on the species, environmental constraints and the sophistication of the setup, production of oils from such is about 7 times greater per unit area than from agriculture. Agitation to maximise productivity can be wind-powered with bio-fuelled diesel backup.
Islanders could e.g. use a small tanker to transfer the waste water from Honiara and other larger settlements to “feed” the ponds with the trace elements required; brought in via the bowels of tourists. 🙂
Useful by-products include pharmaceutals stock, fish food for aquaculture in other atolls, stock-feed for farm animals, etc. and fermentable solids to produce the small amount of alcohol necessary for esterfication of the lipids extracted from algae.
There are some useful FAO and NASA analyses and technical papers (from the 1960’s to 1980’s) on this means of producing bio-fuel. NASA investigated it for sustainable, deep-space travel (taking years) and for the colonisation of planets.

November 18, 2010 7:57 am

Dave Springer
November 18, 2010 at 6:15 am
This is a bunch of Marxist garbage. I haven’t seen to many happy poor people, except in socialist mythology. I sure was not very happy trying to figure out how to get enough food to feed my son every night, or how to cook a meal without electricity.

November 18, 2010 7:58 am

Voters expect elected politicians to work for their benefit. So where do politicians get the idea they can work against the interests of the people.
My guess would be from their political party and the benefits of special interests.

November 18, 2010 8:12 am

The folks of the Solomons should do what many want in the US. Festoon the islands with wind mills. Get the boats off petrol and put up sails. (Yes I know getting back from whence you came may take a while.) 🙂 sarc

November 18, 2010 8:17 am

Electricity costs about $.10/kwh, depending where you live. Imagine you were able to reduce this to $.01/kwh in your local community, what would be the effect? Imagine that instead you increased the price to $1.00/kwh in your local community, what would be the effect?
Would the quality of life in your community be better if electricty was $.01/kwh, $.10/kwh, or $1.00/kwh? Where would there be the most opportunity for people to create wealth and opportunity?

James Sexton
November 18, 2010 8:26 am

@ Dave Springer says:
November 18, 2010 at 6:15 am
“……It’s a tired old cliche but I’ve found that “money can’t buy happiness” is a basic truth at least in the U.S. If anything it might even have the opposite effect. It’s difficult to measure happiness objectively and directly but I think the reciprocal of suicide rate is a good proxy…..”
Hmm, while I understand each of us draw relevancy from what is important to us, and I agree with your thought, I don’t think we’re talking about individual economic success, rather, the general economic success of a population. In this respect, the U.S. doesn’t have the luxury of the Solomons. We must remain economically viable, in order to keep our way of life.
I believe Alexander Hamilton stated it best, “Let us recollect that peace or war will not always be left to our option; that however moderate or unambitious we may be, we cannot count upon the moderation, or hope to extinguish the ambition of others. … The best we can hope for concerning the people at large is that they be properly armed.”
It isn’t about happiness, but rather self preservation.
About taxes for the general conversation. Taxes are always to be assumed to have a negative economic impact. Taxes on income discourages personal achievement and withdraws disposable income from the economy. As noted by Willis, taxes on energy raises the cost of production, and in many cases make production prohibitive. Taxes on the end product raises(a sales tax is an example) the cost to consumers and inhibits economic activity. Property taxes are the most insidious of all, because it flies in the face of the commonly understood laws of ownership. For those that doubt this concept, try not paying your property taxes and then come back to me about how much of what you actually own. (You’re really paying a form of rent.) Capitalism without the ability to accumulate property and wealth is doomed to failure.
In a capitalist society, taxes must always be viewed as having a negative economic impact in any form. Taxes, nonetheless are necessary. They provide for the common defense, properly used they help maintain an infrastructure that facilitates economic activity, and may be used to provide for the less fortunate.

November 18, 2010 9:30 am

Now that’s a nice article.
So, a local $5.75 = US $0.70 per kW-h for electricity in the Solomons if I’m doing that conversion right. That’s something like 3x the cost of diesel-electric as in the US (not including distribution cost)? That cost is not that outrageous given their small demand and lack of participation.
It sounds like they need capital investments like roads, schools, malaria control & hospitals and that they lack buying power in the first place. I agree that it would be nice to cut their electric bill by 5x with coal or geothermal power. HOWEVER, every time I hear about such sad conditions, there is always a story of corruption and missed opportunity to go along with it. From what I have read of the Solomons, that is true.
Going back to Willis’ point on taxation of energy; there are so many problems with this economy, I’m not sure that the type of tax matters. Since they are producing so little salable goods, taxing fuel may be the only hope the government has of raising money, even though it is probably the wrong thing to do economically because the people are so poor. I think Willis is being dogmatic in saying that these up-front costs are always bad.
But this is not an academic question. Why not write a letter to their legislature asking them to move the taxation to production? See what their answer is. They don’t seem to be a dictatorship. I’m sure it’s been debated.
Out of curiosity, how much fuel tax relative to cost are they being asked to pay?

November 18, 2010 10:20 am

Mike Haseler says:
November 18, 2010 at 5:51 am
enerconomics. To put it simply: enerconomics is the use of scientific terms like joules to describe the size of an economy in a way that can be applied to any economy at any time irrespective of the form of money or other value system in place.

Mike, I always enjoy reading your insights. But don’t give ’em too many ideas. Thy were already planning on taxing us by energy numbers when they launched the 4m resolution co2 measuring satellite the other year. Thankfully it nosedived into the southern ocean.

Harry Eagar
November 18, 2010 11:04 am

I endorse LazyTeenager’s question about the potential of the Solomons (or any remote islands) as places for modern economic development.
The Solomons have the additional burden of a miserable health environment that is not susceptible to amelioration.
But Willis’ economic thoughts in this post apply generally, not just to the Solomons.

November 18, 2010 11:54 am

Reading this article triggered thoughts of Maslow’s hierarchy of needs. Without going into the whys & wherefores of differences between individualistic & collectivist societies, the use of fuel is implicit at every level.
For Physiological needs, food must be transported at some stage. Safety needs have to do with people’s yearning for a predictable orderly world in which perceived unfairness and inconsistency are under control, kept so by mobile security. Love & Belonging requires contact & travel, likewise a need for a stable Self-respect and Self-esteem, as people need to engage themselves to gain recognition and have an activity or activities that give the person a sense of contribution.
Self-actualisation is realised in many ways such as being a “good enough” parent or an artist or anything that one is capable of becoming. For a clear understanding of this level of need one must first not only achieve the previous needs, physiological, safety, love, and esteem, but master these needs.
So, everything that makes us human requires fuel. Thus, I am led to conclude that green socialist progressives are seeking to dehumanise the planet. They are a bunch of genocidal maniacs.

November 18, 2010 11:56 am

Interesting you should point out our abundant ‘energy slaves’ Mike Hasler while Willis leads us to consider places like the Solomons with so few of them at their dispoasl by all accounts. Essentially it is the abundance of those energy slaves that allows their owners to be less predisposed to giving up some of them or at least some of their output for communal investment. Now leaving aside the interminable debate as to how much of their output should be invested in that way (ie the overall level of agreed taxation) it’s then possible to consider how exactly we go about taxing them and what effect that may have (ie positives and negatives). What if we gave the warmenistas their maximum nirvana? Namely abandon all forms of taxation to be substituted for complete reliance on CO2 equivalent taxing. ie we simply scientifically rate the various fossil fuels and rate and tax them accordingly on the basis of their most technically efficient burning energy per unit of CO2 output. Brown coal gets taxed greater per tonne than black and a barrel of oil gets similarly apportioned and so on. Now you can see that is the maximum price/income substitution effect that could be achieved without raising the absolute level of taxation, albeit we all need to put aside the interminable squabbles between the various tiers of Govt (Federal, State and Local) as to which tier would raise it, a serious political hurdle in itself.
Therein lies a hypothetical challenge for you all. Are you just a bunch of conservative naysayers sticking to what you know and are comfortable with or can you reasonably conceive of a different constitutional ‘free’ marketplace brought about by the very way in which we collect the agreed level of communal taxation, if that’s ever possible? What’s your essential objection to giving these warmenistas their maximum head, while keeping your hair on?

Rational Debate
November 18, 2010 1:27 pm

re posts by: Richard says: November 18, 2010 at 2:32 am
and: Warren says: November 18, 2010 at 3:05 am
and others, including Willis on the algae lagoon idea…
Thanks for adding facts on problems and costs associated with biofuels, geothermal, etc. possibilities there in the Solomans.
Folks all too often fail to consider the practical issues involved in trying to actually accomplish these sorts of things – including not looking at the complete big picture and what outcomes have occurred where these things have or are actually being tried.
Trying to implement them in a society that is barely scraping by…. too many who mean well just don’t seem to get the fact that barely scraping by means literally the difference between life and death, not the difference between having a cell phone or not.
Even so it is fascinating to learn about and ponder various possibilities that might be able to help folks in this sort of situation.
Malaria control sounds like a huge issue there – I had no idea it was endemic and so prevalent.
Willis, this likely pie in the sky – but the Solomans, being isolated, sounds like it might be a prime location to try something like the sterilized GM mosquitoes just released in the Cayman’s. Huge drawback for the Solomans I’d imagine, that there are so many islands so strung out…. Pro’s, they already tried it for an island area for dengue carrying mosquitoes – but I have NO idea if the island was charged or how the economic side was worked, free, cost, ??
Anyhow, I wonder if it might not be worth a call to those dealing with the sterilized mosquitoes to see if they would have any interest in experimenting in the Solomans…. Lord knows it sounds as if the Solomans would be a very easy area to quickly see how effective these sorts of efforts would or wouldn’t be, and could be a huge benefit to the population there.

Rational Debate
November 18, 2010 1:37 pm

Willis, thanks for your replies to my queries. Its fascinating to know that you’ve fished the Bering and have practical experience that way in something that is so difficult tho also potentially quite lucrative (it sure ought to be for the risks taken!).
Anyhow, not that it matters but I’m glad you’ve seen and enjoy “Deadliest Catch” as I do – I was surprised and intrigued when I first happened on it and watched a few episodes. I’ll be sure to check out “Bristol Bay Brawlers.” I can only watch and imagine – and have no doubt it is a lot more fun watching than doing…. but doing would be a real challenge and something I could have gone for in my 20’s. I’d sure pass on it these days tho!

November 18, 2010 2:28 pm

@ Keith Minto, @ Willis Eschenback
Minto: “Also in an informal economy like that, adding a tax at the market end would be difficult, cash registers are few and far between in ‘wet’ markets, it is a lot easier to tax the fuel in an unsophisticated economy.”
Eschenbach: “You are right, it’s much easier to tax the fuel … and much more damaging.”
Me: This is a classic debate, where both of you are right. The debate arises from the conundrum that taxes are necessary, but every tax is distortionary, and comes with a dead-weight loss. In the real world, governments have to settle on theoretically “bad” taxes. Imposing a small turnover tax on every market stall would be a relatively “good” tax in theory, but the cost of collection would be greater than the amount raised –> the “good in theory” tax becomes a “bad in practice” tax.
A common solution in developing countries is to tax big things that can’t be moved, like mines. Another favourite is taxing luxury goods, or essential inputs whose import can be monitored (like petrol). What am I saying – even first-world countries end up settling on that sort of solution. We all the know the disadvantages of those approaches. If a mining tax is too high, foreign companies can decide not to invest in mining in that country. Luxury goods and petrol can be smuggled to avoid the taxes. The trick is to set these taxes at some reasonable rate that still manages to raise the revenue that government needs.
That said, I generally appreciate the real life perspective that Willis brings to the debates here. In the real world, most people still don’t have enough protein, and their lives are shortened by things like smoky cooking fires (whether wood, kerosene or coal). An extra cost of a few cents a day means the difference between life and death for many – young children, sick people, anyone. We need to remind ourselves of that every time we get sidetracked by an angels-on-the-head-of-a-pin argument about the relative merits of bio-diesel, geothermal, and all that.

Retired BChE
November 18, 2010 2:32 pm

This has been a very interesting post. I have been to a number of places with people living on the edge of starvation, but never on remote islands like the Solomons. I believe the only road out of their situation is if some country or company should find an interest in developing some kind of industry or other economic activity that would bring in outside money and technically sophisticated workers. This is an agrarian society, and I doubt has any engineers or construction workers to build things like ethanol from sugar plants. During WWII, soldiers found that Guadalcanal was a terrible place to be because of malaria and fungus diseases. If the other islands are similar, the only thing I can think of that might attract interest would be a pharmaceutical company looking for the next wonder drug developed from natural plants in this remote location.

November 18, 2010 3:01 pm

If you open your minds to the possibility AGW could be real and put yourself around the other side of the table for a moment, the logical response is to consider that hypothetical I outlined- ie we could all agree to ditch all other forms of taxation for total reliance on CO2E taxing to gain a maximum income/price effect and yet still retain the benefits of a ‘free’ market we all know produces the greatest good for the greatest number. Notice that ticks a lot of our boxes vis a vis the current constitutional marketplace we find ourselves inheriting (ie that we have deliberately or inadvertently ‘engineered’ over a long period) The warmenistas could well be right that it’s high time for a radical paradigm shift and hold that thought. What’s wrong with giving them their head on CO2E taxing? Lots of ticks for it. Administratively simple to collect at the mine or well-head, virtually unavoidable, neutral in its effects(doesn’t discriminate between private, business, charitable or religious endeavours) yet quite progressive in the sense that we know it will soak the wealthy/rich harder because of their much higher consumption of fossil fuels. Also it taxes the life blood of capital rather than human sweat, effort, entrepreneurship and risk taking and wouldn’t that be an added bonus for those with largely only their physical labour to sell? Even without the threat of AGW it facilitates the transitioning from a peak oil world and furthermore would make the existing stock of manufactured goods more advantageous than plundering the natural environment with more fossil fuels. ie it would favour quality over quantity and enhance the value of recycling manufactures with large fossil fuel outlays inherent in them. Lots of ticks and few crosses when you think about it and I put it to a number of committed warmenistas for their consideration. That lead me to the next obvious step in a new constitutional ‘free’ green marketplace. Can you see it?

November 18, 2010 4:19 pm

I’ve a BETTER idea: User fees.
Why taxes at all? If you use a so-called ‘government service,’ then you pay a ‘user fee’ for that ‘service.’
Who needs most of what governments do anyway? I certainly don’t!
The lot of them are nought but a pack of blood suckers on the government teat.
With NO TAXES at all, then the only thing needed is that which is used.
If you don’t use it, then you don’t pay for it. AND, if NOBODY USES IT, then it isn’t needed!
How hard can it be?

November 18, 2010 4:55 pm

Grey Lensman says:
November 18, 2010 at 3:47 am
Is this the plant
Nope, not that one, this one
I am not sure how costs can be markedly reduced. This is a geologically active area, we had a significant earthquake in 1987 (6.2 Richter) so structures have to be engineered accordingly. Also, geothermal steam contains a high proportion of H2S which oxidises readily into H2SO3 and H2SO4 so there needs to be a designed resistance to acid corrosion, combined with air pollution controls. Connection to the grid costs must have been minimal as the access point is less than 2Km away.

Rational Debate
November 18, 2010 5:46 pm

re post by observa says: November 18, 2010 at 3:01 pm
it will soak the wealthy/rich harder because of their much higher consumption of fossil fuels. Also it taxes the life blood of capital rather than human sweat, effort, entrepreneurship and risk taking and wouldn’t that be an added bonus for those with largely only their physical labour to sell? Even without the threat of AGW it facilitates the transitioning from a peak oil world…
Sigh. So, observa, the likes of John Travolta gives up one of his 6 jets and perhaps sells one of ??? properties to cover the cost increases of his CO2 heavy lifestyle – meanwhile, the increased fuel cost bankrupts and puts literally tens of thousands into bankruptcy and poverty as they can no longer pay the fuel costs to get to work plus the increased cost of all the food and every other product they buy, and they can no longer pay their utility bills and start going without basic utilities to varying degrees – or they become homeless. Medicaide, unemployment rolls, food stamps, all forms of welfare explode, with that burden ultimately coming out of the pockets of the now far fewer people who are still able to earn enough to even pay taxes… and so the domino’s fall, and that’s just using the USA as an example.
So, please, explain to me how raising fuel costs/taxing CO2 somehow soaks the rich more than the poor?
And that doesn’t even directly consider the fact that you are only considering individuals – who gets ‘soaked’ the most is every single business or manufacturing project that uses a lot of energy. So many of those are quickly forced out of business, and the price of everything from the others is drastically increased. Now who does that soak? EVERYONE, with the poorest by far the least able to absorb cost increases and so therefore hurt by far the worst.
Please, explain to me what the difference is between: “the life blood of capital” and “human sweat, effort, entrepreneurship and risk taking?” Are those not the one and same thing?
Lastly, have you kept up to date on “peak oil?” By “up to date,” I mean, not just from the “peak oil” advocate’s side, but also from alternate viewpoints?? Peak oil simply doesn’t seem to be an issue until probably the end of this century – and by then, considering the pace of our technological advances, the fact that “peak oil” was supposed to occur back around 1920 and yet every single decade since those first claims of peak oil we’ve had MORE proven reserves around the world than each proceeding decade… as early as 2004 at least (likely far earlier for all I know), we’ve known that the USA alone has enough shale oil to provide for the high end projections of USA oil needs for the next 100 years, at competitive prices (competitive to current oil prices that is, or 2004 prices if that was lower). USA shale contains roughly twice the amount of oil in the Canadian oil sands, and when you add the two together, IIRC it’s more oil than the total known world proven oil reserves. Ironic timing, but yesterday there was a NYT article no less that touched on some of these issues: “There Will Be Fuel”
All in all, I just find it very difficult to credit arguments based on ‘peak oil.’ Nor can I see anything but harm in policies that hurt almost everyone, and disproportionally the most poor, in order to avoid ‘peak oil’ or a supposed possible 2 degree temperature increase by 2100, for which beggaring so many would by the best estimates of those supporting these policies, have a minuscule effect on those 90 years in the future temperatures. Even more so when one considers just who does benefit from these sorts of schemes – expanded governments, expanded government control of entire economies and all citizens, and massive wealth redistribution – all of which is absolutely bound to be shot thru with corruption, inefficiency, fraud, etc. We see these problems even in the best government – it gets far worse in third world countries, so again, who actually gets soaked by far the worst? The poor, and the poorer the country, the worse the effect is likely to be on the poor in those nations.
Seems to me that its a very bad deal, all the way around.

Grey Lensman
November 18, 2010 5:48 pm

Willis said
However, I have to say again that I greatly enjoy the plans that the AGW supporters come up with. For anyone who has actually tried to do anything similar to what is being proposed, they are often a refreshing burst of absurd assumptions and unworkable conclusions, wrapped up in enough good will (and authentic good will, I will say in their defense) to sweeten several tanker loads of lemon juice.
I agree with you 100%, for the record, I have never believed the global warming scam and have spoken out against it from when it started. But, I do believe in people, their needs and their aspirations to better life. Thus Corporations play second fiddle to people.
That is one of the problems with wind power, its sold as a corporate solution. It can work on individual basis.
Similarly , Islander need to rely on corporate imported fuel But with some effort they dont need too. I am only drawing attention to the potential alternative.
I know what you refer to, I live in Malaysia and have close contacts, daily with the South pacific. In the specific case of Solomon Islands, I think the best best is geothermal with other back ups. Dont put all your eggs in one basket. I posted the link to the latest scheme in New Zealand.
Really appreciate your work and its nice to see you looking at the implications on ordinary people.

Bernd Felsche
November 18, 2010 6:07 pm

Willis Eschenbach says:
November 18, 2010 at 12:23 pm

Except for the facts that nobody on the planet knows how to do this in an economical way, and that turning world-heritage class reef and lagoon systems into green algal soup might offend the local inhabitants (both human and otherwise), and that the machinery to do it all wouldn’t get maintained, this is a wonderful plan.

“economical” varies by market. (And I wouldn’t say that nobody knows!) If the alternative is to ship in fuels at great expense, then fuel from algae can be competitive. ISTR that the break-even point was about USD$100/bbl equivalent in oil. There has been a great deal of research (at great expense) into biofuels from algae over recent decades, but very little of it aimed at methods of making it cheaper and “low-tech”, appropriate technologies. The research instead appears to have been to widen the technology-divide.
But even the appropriate technologies won’t help if the people that the technology is there to serve, either reject or fail to appreciate its value. I understand that if such technology were to be implemented by some, that there is a high risk of a shift in the balance of power in island politics. So it’s not just the level of the technology that must fit the field of deployment, it must also slot into the social structure for it to succeed. Technology is inherently disruptive. Its purpose is, after all, to change the way that we live.
(I always hesitate to write all my thoughts on a blog response; imply to preserve some illusion of brevity. Rest assured that I have considered a wide range of issues and consequences even if they haven’t been written down.)
As for the “world heritage” reefs and lagoons, if those are more important to the Islanders than cheaper transport to provide a better standard of living and better health services, then that’s their choice. I’ll also not hesitate to remind them of that choice when they complain about the expense of transport and poor health standards; or when they stretch out their hands for a donation.
I’m happy to help people who are trying to work towards making a better life for themselves (and others) but I have no time at all for those who seek to perpetuate or impose misery.
P.S. You should have let us know where you were heading and approximately when. At the very least you’d have a friend or three to call. Not all hotels and motels are full, there are dozens listed in the Brisbane area, with rooms currently available; if you’re not too fussy. From my secret travel tips.

Keith Minto
November 18, 2010 8:28 pm

Nov 18, 4:19, 2010
Sometimes, communities like the Solomon Islands need a little help from Governments, not necessarily their own, Australia is proud to be of assistance through RAMSI and continues to do so.

November 18, 2010 10:24 pm

The discussion on this site is a painful demonstration of why solutions generated in the first world tend to fall over when attempts are made to implement them in the third world. Fortunately, some posters have mentioned a few of the features that make implementing economists’ solutions difficult.
Like the fact that SI covers some 777000 square kilometres, but only 28000 sq km is dry land (well, not exactly dry, because it’s mostly rainforest)
Like the fact that the population is also spread very thinly, and mostly engaged in fishing and subsistence agriculture- few economies of scale here.
Like the fact that education is not compulsory, and fewer than a third complete a fairly basic secondary school.
Like an absence of government infrastructure that makes policy implementation/ taxation /service delivery often difficult, sometimes impossible, and always costly.
Like the fact that clan and regional loyalties are the main determinants of decision-making- not to mention serious ethnic tension that spilled over a decade ago, which led to Australian military intervention.
Like the fact that corruption is endemic at all levels- Government Ministers enriching themselves selling off timber harvesting rights for next-to nothing to Malaysian-based interests etc IIRC fishing rights suffered the same fate. The government was insolvent in 2002.
Like a land tenure system based on customary or clan rights- getting agreement to do anything different, like eg establishing cash cropping, is almost impossible.
If your proposed solutions don’t recognise the facts on the ground, they will fail.

Grey Lensman
November 18, 2010 11:24 pm

Bernd says
“economical” varies by market
That really is a major part of the problem in finding solutions. Beside climate warming “science” economics must rate as one of the most phoney sciences. Sorry econoomists.
We see posts above referring to “not economical” or soaking the rich (huh) or Taxing Incomes. I wonder what planet they live on.
A classic is the energy in/out argument, yes it has validity but needs to be considered in context. Several said above that biofuels consume as much energy as deliver it. Well I have looked for years and I cant see it at all in any form. Growing an oil palm is so simple, very little effort or energy input, no matter how you define energy and it delivers 1300 gallons per acre per year.
In a similar vein they talk about subsidy buy totally ignore the inherent subsidies on fossil oi.
Thus I sate the simple obvious, if it works, it works.

November 18, 2010 11:51 pm

I saw a bit of the Solomons thirty years ago, Since then they would have done better without the civil war. An optimistic, generous and interesting people. The wontok system is a barrier to development. Wontok is pidgin for ‘One Talk’ and reflects the many languages and cultures of the pacific, a wontok can be a tribe, a grouping or a ‘mate’ in aussie lingo. They have been ripped off by western companies for copra, timber and resources, this continues. Copra is used in margarine and the middle man makes the money. The village gardens provide good subsistence agriculture and good nutrition. Canned tuna and imported rice were the main nutritional issues. They actually have more of the basics for long term survival than many western societies. I’ll go back one day.

Grey Lensman
November 19, 2010 6:22 am

Richard thank you for the Mighty river info. I can now do some very basic illustrative sums.
Mighty river produces 100 MW and cost USD 232 Million
NZ electricty price is USD 0.126 per KW/Hr
That converts to USD 302,400 per day ( I know, ignore transmission costs/losses)
Fuel cost zero
Two years to recover capital cost
The worlds largest and most efficient diesel engine produces 80MW
Fuel cost alone at todays prices is USD 150,720 (plus a substantial lubrication cost)
Now the latter requires waste heat unit, low pressure turbine, massive operation and maintenance costs, emission control costs etc. The operation and control/management system is also vastly more complex.
Now NZ produces approx 75% of its power requirements by renewable sources, amongst the highest in the world. So why are thay spending good money on wind farms. You will not throttle hydro or geo when the wind blows and why spend money on instant fossil fuel back up. Makes zero sense.
Looked at in this simplistic way, the calculated efficiency really means nothing.

Grey Lensman
November 19, 2010 9:04 am

Now the punchline re costs.
The diesel engine mentioned above plus a 1200 foot ship, 220 feet wide able to carry 15,000 containers cost in total usd 170 million. So why did NZ pay usd 270 million for a bunch of holes, a turbine, an alternator and a building?
Thats what I meant when I said the costs can be reduced greatly.

Grey Lensman
November 19, 2010 5:52 pm

Simple figures, yes, but its a starting point. Its what makes me say “what is going on here”. Then get into the detail.
I can see that we could go to USD 1,000 per KW, above Solomon Islander budgets but way within NZ purchasing power.
Then who owns the energy? Who benefits? How about some EnergyBonds to fund more, Bonds issued by the owners?

Dave Springer
November 19, 2010 6:03 pm

Grey Lensman says:
November 19, 2010 at 6:22 am
In the U.S. hydro-electric power is $119/mwh to produce. Compare that with $119 for nuclear, $111 for biomass, $115 for geothermal, $149 for wind, $100 for coal, $396 for solar photovoltaic, and (drum roll please) the undisputed king of low-cost electricity $79 for natural gas.
Caveat: this is for NEW power production. New hydro is so expensive because it requires dams to be built and condemnation of private property flooded by the newly created reservoir.
One of the comments by a congressman at the recent climate change hearing said something notable – generating electricity isn’t a problem. Liquid fuels are the problem on a number of levels. The U.S. transportation sector runs on liquid fuels and electricity isn’t a viable substitute. He made the point that no one ever talks about aircraft being powered by electric motors – it simply isn’t feasible. That underscores the problem with electricity. The only viable alternative I can see is liquid fuel from biomass. Not just any old biomass but rather from genetically engineered artficial organisms whose sole task in life is efficiently turning air, sunlight, and water into fuel oil and alcohol, both of which fit almost seamlessly into existing liquid fuel infrastructure.
Electricity I believe will eventually be largely generated by decentralized photovoltaics in combination with centralized generation where central generation is used to satisfy demand when the sun isn’t shining. While PV is very expensive today the key thing about it is that it is electronic in nature and should rapidly decline in price like all other electronic gimcracks have done in the past – PV technology isn’t following Moore’s Law of twofold cost/performance improvement every 18 months but it’s still on the same kind of curve. It’s really more of manufacturing engineering problem than a discovery (science) problem. Manufacturing advances are much more predictable than scientific advances.

Dave Springer
November 19, 2010 10:19 pm

DesertYote says:
November 18, 2010 at 7:57 am
“This is a bunch of Marxist garbage. I haven’t seen to many happy poor people, except in socialist mythology. I sure was not very happy trying to figure out how to get enough food to feed my son every night, or how to cook a meal without electricity.”
Maybe I’ve just been fortunate. I’ve seen and shared a great deal of joy and celebration of life where there was little money but the culture was rich in community and interpersonal relationships with friends and extended family. Mexican, Native American, and even Amish cultures. The latter two cultures are rather communal. Conversely I’ve seen plenty of well-off people who are miserable decadent wretches who drink themselves to sleep every night. I wouldn’t give better than even odds that the people living in any random wealthy American household gets more joy out of life than the poor Mexican day laborers they hire to take care of their landscaping nor would I bet the former are in any better overall health.
But I was really wondering about tropical islanders not different cultures living within the U.S. because I have no personal experience with islanders. If you look at suicide rates among the 100+ countries in the list I linked you’ll see that tropical island nations are clustered at the lowest suicide rates and Japan, which is one of the wealthiest nations on the planet, is in the top five for highest suicide rate. There seems to be no correlation with suicide rate and the factors one might expect to cause extreme unhappiness like poverty or socialist governments.
Here’s the link again:

Grey Lensman
November 20, 2010 1:08 am

Levelised energy costs say it all, same malaise as Global Warming and its adjusted temps.
Trouble with electricity nobody runs transport on it. So what, every tonne saved of fossil fuel is a tonne saved. Every tonne of CO@ ( if you think thats important) not emitted is a tonne saved
Same with biofuels every gallon used is a petro gallon not used.
I am staggered they dont understand that.
See my figures above, from real life, they work

Bernd Felsche
November 20, 2010 10:38 am

Willis Eschenbach says:
November 19, 2010 at 9:32 pm:
The point about economic viability stands. If nobody’s doing it, doesn’t mean that it can’t be done. There’s a matter of startup capital; and as you correctly observe, breaking into the culture to gain some acceptance.
The few photos that I’ve seen of the area show lagoons with endemic algae. Some of that could be harvested on a small scale and should certainly be analysed to determine which endemic strains would be most suitable for further development. Failing to use endemic strains has been the main cause for the failure of such projects. (Despite that factor having been documented by the FAO decades ago.) If no endemic strains provide the potential for high yield, then the project should not proceed.
With the potential of each acre producing 3000 gallons of diesel a year from high-yield strains (before deducting the fuel used used to drive pond races and harvesting when there’s not enough wind), it would require a relatively small area of lagoon to supplement the fuel needs using “cottage industry” methods. A village could produce enough fuel to run a diesel generator as well as its boats. It is not the object of the exercise to turn the islanders into oil Sheiks; but to affordably, for them, to increase the amount of affordable, available energy.
Other algal oil ventures have failed because they compete with cheap oil. In the case of the Solomon Islands (and other islands in the Pacific), the oil isn’t cheap. As you know, fuel can be very, very expensive on those islands; putting a cap on the potential productivity and standard of living of the islanders.
Other reasons for failure stem from (scientists) trying to implement inappropriate technologies (i.e. failing to employ Engineers and local knowledge).
The other factors to keep in mind is that algal oil production doesn’t compete for land or fresh water resources. It doesn’t require food to be used as a fuel, but it can in fact be used to enhance agricultural yields. Also, it can make use of sewage from increasing settlements; and the exhaust from carbon-burning generators can be piped directly into the raceways during sunlight hours in order to improve the yield.
btw: I was recently stunned to read that Baking Soda Dramatically Boosts Oil Production in Algae. Stunned because they deem it dramatic, a discovery and a surprise. Perhaps that can also give you a sense of the state of spurious research in the area..
oh dear … 2:35 a.m. 3 hours after starting thjs response before going to bed. I hear rain on the roof and now smell the parched plants slurping it up. Good night.

Brian H
November 20, 2010 1:21 pm

ge0050 says:
November 18, 2010 at 8:17 am
Electricity costs about $.10/kwh, depending where you live. Imagine you were able to reduce this to $.01/kwh in your local community, what would be the effect? Imagine that instead you increased the price to $1.00/kwh in your local community, what would be the effect?
Would the quality of life in your community be better if electricty was $.01/kwh, $.10/kwh, or $1.00/kwh? Where would there be the most opportunity for people to create wealth and opportunity?

Hi, geo;
Want to give your imagination some fun exercise?
How about an average cost of $0.0025/kwh world-wide?
Could happen. If the project at succeeds, small 5MW generators costing about $250,000 FOB factory door and with output about ¼¢/kwh could start hitting the world market in about 5 yrs.

Rational Debate
November 20, 2010 10:22 pm

re post: Brian H says: November 20, 2010 at 1:21 pm
I wouldn’t hold my breath on fusion, let alone commercial micro fusion devices. For many decades now it has sounded very promising that we were almost there and commercial fusion was just around the corner. While some great advances in the technology has been made, practically we’re no closer now than we were long ago. To the best of my knowledge, no one has even managed ignition yet. It’d sure be great if they do – and it could happen any day, but frankly I wouldn’t be surprised if they still weren’t there yet in another few decades, unfortunately.
What is perhaps much closer and more practical at this point, in that its an existing known technology, is micro nuclear power devices. Depending on the model, they’re about the size of a hot tub, 25MW (power for about 20,000 average American homes & far more than that for the electrical usage typical somewhere like the Solomans I’m sure), self contained & virtually zero operation or maintenance requirements, life span of 7 to 10 years, and about $25M to $50M depending on where you read about them (or maybe its depending on the manufacturer?). Another version is 200 kw (power for about 100 average American homes), 40 to 50 year life span, 20 ft x 6 ft, still easily transportable by ship, rail, truck, plane.
Anyhow, there are a half dozen or more different micro reactor designs, each with varying parameters, but expected electricity costs between 5 to 10 cents/kwh.
I have no idea if locations like the Solomans could even begin to swing something like this in terms of cost (suspect not but would be curious to know, tho!) – or if they get enough foreign aid to even be able to consider something like this or anything else in this ball park price wise. On the face of things however it sounds as if it might be more practical, reasonable size, and cheaper than some of the other options that have been mentioned here.

Bernd Felsche
November 21, 2010 12:24 am

Brian H says:
November 20, 2010 at 1:21 pm

Could happen. If the project at succeeds, small 5MW generators costing about $250,000 FOB factory door and with output about ¼¢/kwh could start hitting the world market in about 5 yrs.

I’m an optimist. And I think that the timelines are grossly optimistic. And the costs in the order of wishful thinking.
Take e.g. the EU wholesale price of electricity which is about €0.04/kWh; but ocnsumers in e.g. Germany have to pay €0.25/kWh. The additional cost is in taxes of one form or another (e.g. by forcing electricity generators to buy co-generated electricity at up to €0.60/kWh) as well as the distribution network. Building and maintaining the network of generation plant, long and short-range distribution as well as sub-stations carries a significant cost.
The ability to build small generating capacity cheaply doesn’t automatically allow one to do away with a large part of the grid infrastructure. People and businesses want reliable power and no machine is completely reliable. So redundancy has to be provided; meaning some sort of inter-connect between small generators, with extra capacity provision for the inevitable failure of a neighbouring station.
Such interconnection requires a sophisticated control system. You can’t simply hook the wires together! And the more connected generating nodes, the greater the chance of grid instability. That is almost exactly the same problem as is experienced with wind power when it’s connected to the main grid.
As a stepping-stone, I’d first like to see nett energy produced by the advertised process. That may take 5 years. It’s not happening now AFAICT. Then one has to commercialise the plant. That’s not going to happen in less than 3 to 5 years, even ifthere are early adopters willing to take a high risk. Those things take time. Throwing more money at the development doesn’t speed up development unless it’s starved of funding. Generous funding instead has the perverse effect of slowing development. (vis “climate research”).
Governments will be made to regulate and control these “magic boxes” that people can’t be bothered to try to understand. Fear-mongers out of ignorance or with ulterior motive, will delay and obstruct for a decade.
It would be optimistic to assume a timeline of 20 years for full, commercial production at the cost competitive with conventional and existing nuclear technologies. And then a couple of decades to adapt the electricity grid.
The prospectus ends up in the recycling bin if it vaunts a time to market of 5 years, where the underlying technology is not yet shown to work and the necessary technologies unknown.

Bernd Felsche
November 21, 2010 8:57 am

Willis: re Toshiba 4S … interesting design and concept. Not too sure how they’d go in the ground in the Solomon Islands … it’s a tad geologically exciting, IIRC. But then, the Japanese have experience with earthquakes.
Other options are some Russian “floating” reactors; based on those used in submarines, etc. Perhaps a bit risky in typhoons!
South Africa’s modular high-temperature gas pebble-bed reactor technology would fit quite well; were it ready for prime-time and not again been put on ice.
The UAE signed up in January of this year for 4 nuclear plants to be built, fuelled, operated and maintained by KEPCO. Amortised cost for the 60-year contract is about USD$0.055/kWh at 100% utilisation. Obviously the Solomon islands won’t need anything like those 4 x 1.4 GW units; which are costing the UAE $40,000 million over the contact period.
Honiara’s 10MW diesel unit could chew through a lot of diesel in a year. Around 16,000 tonnes a year at full capacity by the numbers I can fit on a Post-it note. Self-sufficiency in e.g. even algal biofuels is impractical on that scale; the required area is simply too large to manage (>5000 acres). About 100 times too large.
They will have to be energy importers; with nuclear being the most-dense source available; by orders of magnitude.
I’m keeping an eye on Indonesia; which is building a nuclear generating plant on Java. There are already several research reactors on the island. BAPETEN – Indonesia’s Nuclear Regulator
I strongly suspect that Honiara would be energy-constrained by only having 10MW of electricity available for a population of 80,000. Something like 100MW would be needed to get the place humming.
In your own article “Constructural GDP” you drew some lines and the scatter diagram of energy use vs GDP reminded me of the one in Social Consequences of Engineering, edited by Hayrettin Karstunger (ISBN 0-87835-073-X), Chapter 3, contributed by Ali B. Cambel of George Washington University. Figure 3.2 with data from 1972.
(The text says nothing about this only being the energy for food production; only the caption)
So I reckon 1kW/person plus 20% headroom should provide enough energy for a while.

Bernd Felsche
November 21, 2010 9:00 am

Seems like embedding the image didn’t, even after it worked in preview…
Try this link

November 21, 2010 9:46 am

Bernd Felsche says:
November 20, 2010 at 10:38 am
“btw: I was recently stunned to read that Baking Soda Dramatically Boosts Oil Production in Algae. Stunned because they deem it dramatic, a discovery and a surprise. Perhaps that can also give you a sense of the state of spurious research in the area..”
And the article says it’s because the Soda gives the algae a boost of CO2 when they need it… Duh.

Moritz Petersen
November 21, 2010 1:19 pm

You might get an even stronger relationship between GDP and Energy use, if you compare usable energy (after subtracting energy losses) to GDP. Hereby one can reduce the distortion by different efficiencies.

November 21, 2010 4:06 pm

My apologies if this has been said before, WUWT travels at such a speed, it’s hard to keep up sometimes.
If cocunut oil is so central to their economy, and it also being a large constituent of the beauty trade, are they trading up in the value they are adding to the product? Moisturiser for instance, must trade at a substantial multiple to what they can get for the raw product. That’d be giving a guy a fishing rod instead of a fish, maybe?

Bernd Felsche
November 21, 2010 6:32 pm

November 21, 2010 at 4:06 pm
Adding real value requires energy. e.g. the processing of raw materials into a refined stock material for further processing requires the input of energy. A reliable source of affordable energy so that the product can be sold at a competitive price.

November 21, 2010 7:58 pm

Willis Eschenbach said: “The average week for a village guy in the Solomons runs something like this. Monday. Fishing. Tuesday. Work in the bush garden. Wednesday. Try to go fishing, but other stuff comes up. Thursday. Sleep, the ocean is rough. Friday. Fishing. Saturday. Bush garden. Sunday. Go to church. Beat wife. Monday. Paddle canoe to market town down the coast. Tuesday …”
I thought they also played rugby. Or is that just in the city? I knew an Australian diplomat who got Honiara as his first posting. Most diplomats thought it was a horror post, but he loved it, because he fell right into the rugby scene. He went on to become something of a Melanesia specialist, with postings in PNG and elsewhere.
BTW, a long time ago I worked picking fruit with descendants of Melanesian islanders, known in Australia as Kanakas. They were among the best workers in the orchards. The Thursday Islanders (also Melanesians) were just as good. I’m surprised that the work ethic (or lack of it) back in the village is so different.

Brian H
November 21, 2010 9:08 pm

Rational, Bernd, Willis;
I’ve been following this project closely for years. Your parallels don’t really map; this is far closer to reality than your comments suggest.
As far as “delivered cost”, the 5MW generator would be about $300K hand-built; much lower in mass production. And the delivery system doesn’t need to be as brutally expensive as the German one; I pay 6½¢/kwh for hydro power here which is about 2½¢/kwh to generate. Further, these units can be set up in “distributed” nodes as needed, significantly reducing the need for long-distance grid transmission. They’d fit in a standard shipping container, able to be transported and installed just about anywhere remote monitoring and semi-annual servicing is possible. For larger centers, clustering and stacking of up to hundreds of units in standard factory or warehouse buildings would be feasible.
This is not like small fission units. No heat/steam cycle is involved, and no waste is produced (ordinary He4, a few kg. a year).
As far as institutional “resistance”, I think that inter-jurisdictional competition would deal with that. The competitive advantage of having zero-emission ultra-cheap power would be so great that no region or jurisdiction could refuse it or deliberately cripple its own access for long. Certainly not a decade.
In any case, the next half-year to year will answer many of the basic questions.

Rational Debate
November 21, 2010 11:54 pm

re post by: Brian H says: November 21, 2010 at 9:08 pm

Rational, Bernd, Willis;
I’ve been following this project closely for years. Your parallels don’t really map; this is far closer to reality than your comments suggest.

Oh really? Tell me this – have they reached ignition yet? Last I knew, no one had (unless you want to count the bomb). Short of that, it could be tomorrow when someone actually manages igition, or it could be decades out yet. Or, tho I doubt it, it could be never. There’s simply no way to tell.
For anyone here not familiar with the term ignition as it is used in the fusion world, basically ignition is the point where you not only get fusion (no matter how tiny the size), but you manage to get more energy out of the reaction than you put in to get the reaction, even if by some infinitesimal amount.
For literally decades now those working closest to fusion were certain ignition was right around the corner, that they’d have it literally any day. Its very easy to get excited about fusion. Still hasn’t happened yet to the best of my knowledge tho. Once someone does manage ignition, its still a LONG LONG way from being a controllable process to the degree needed for anything commercial. Last I knew the longest they’d even managed a reaction was on the order of about 6 minutes.
Until they actually get ignition (& gawd knows when that’ll occur), its quite simply pie in the sky. Even after ignition, its still dreaming until they’re able to work all the bugs out and actually sustain the process and sufficiently control it. Gawd knows how long that will take.
Don’t get me wrong, I love the idea of fusion – always have. I’ve even seen the inside of a large research reactor and stood on the catwalk right around its edge. So while I can’t say I’ve followed the progress all that closely here recently, it is something I’ve kept an eye on for many many years now – and I’m sure not holdin’ my breath. I’ll start getting excited again once someone at least manages ignition.
So….. to talk about it as if it might be something practically worth considering for somewhere like the Solomans, in the very near future, and even start talking about what it would cost and how it’d be cheaper and more practical than other proven technologies??? Snort.

Rational Debate
November 22, 2010 2:10 am

re post by: Willis Eschenbach says: November 21, 2010 at 12:25 am
Interesting you should mention that, Rational. A couple of years ago I went with the (then) Solomon Islands Minister of Energy to the Japanese Ambassador to the Solomons. We made a formal request from the Solomons Government for the Japanese Government to team up with Toshiba and install two 10 Mwatt Toshiba “4S” reactors in the Solomons…..
Plus mainly my motive was, how often in my life am I going to be able to write a proposal for a nuclear reactor? … might as well ask for two since I have the chance.
In the event the proposal was swallowed by the Japanese government bureaucracy and the Solomons government changed (along with the Minister for Energy), life is like that. Can’t catch fish unless you put lines in the water … would have been a win-win situation.

Willis, I like the way you think! [VBG]
On your fishing analogy – that was my thought with the possibility of contacting the company researching sterile mosquitoes for disease control. Heck, if they’ll experiment in the Cayman’s for dengue, maybe they’d consider the Solomans for malaria.
It’s a darned shame that the proposal fell into the bureaucratic black hole that way. That may very well have happened primarily because of the status of design etc. at the time – maybe your proposal came just a little early for where they turned out to be at the time. I sure hope you’ll try playing that tune again. Play it again, Sam… er, Willis. Is the new/current Solomon Energy Minister opposed to the idea? Or the Soloman Government? Heck, maybe worth just touching bases with whoever you were dealing with in Japan, and see if they’d consider breathing life into it again. Or are there any other possible countries to approach about something like this, or even a possibility of seeing if several would band together to help? The US certainly has experience with small reactors for the military. Just surfing around a bit it appears that a number of the micro designs by other companies, while using well established technology for the most part are still a few years off in terms of going commercial. Ironically, Bill Gates ( w/ his comp. TerraPower) has apparently partnered with Toshiba to develop a traveling wave reactor. I guess China & Russia are hot on various micro & small reactor versions too. Probably not mentioning anything here that you weren’t already aware of, but just in case.
Anyhow, its certainly an interesting possibility, and a darned shame that your earlier proposal didn’t wind up going a bit further.

Rational Debate
November 22, 2010 11:25 am

Oops, well, a minor revision to my post….
When I said: “Willis, I like the way you think! [VBG] ”
I had meant to put it in line directly referring to your comment: “Plus mainly my motive was, how often in my life am I going to be able to write a proposal for a nuclear reactor? … might as well ask for two since I have the chance.”
Especially the bit about might as well ask for two. :0) Although your “Can’t catch fish unless you put lines in the water … would have been a win-win situation.” is great too.
Was just too late and clearly I was a bit cross-eyed & not thorough enough when I made my post. :0)

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