Tag Archives: cash / price pressures

53 Million in ‘Emerging Markets’ Plunged into Poverty by Great Recession

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A World Bank study has projected that the global financial crisis and resulting recession will plunge some 53 million people across “emerging markets” —like China and India— into absolute poverty, in 2009 alone. In China, tens of millions of people have lost jobs related to the export-dependent manufacturing sector.

Such a collapse in private fortunes for millions in the developing world could lead to major political instability, so China and other nations are on the lookout, ramping up security operations and domestic crackdowns on dissent or public gatherings. Unrest in China’s western Xinjiang province tied to repression of the Uighur muslim minority also has a socio-economic component, as Beijing steers Han Chinese merchants into Xinjiang with subsidies, while Uighurs remain poor.

It is thought the upheaval in response to Iran’s apparently manipulated vote, indeed the manipulations themselves, may be rooted in failing economic fortunes, as foreign wealth to invest in commodities like petroleum shrinks and jobs and wealth across the Islamic Republic are threatened.

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UK Announces Plan for 40% Low-carbon Energy by 2020

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The Labour party government of the United Kingdom has announced plans to establish an aggressive overhaul of national energy markets, shifting to 40% low-carbon energy sourcing, across all industries, by 2020. The energy secretary, Ed Milliband, will be given control of allocation of electricity across the energy grid, in an effort to speed the green-energy revolution to allow the UK to meet its legally-binding agreed emissions cuts of 34% by 2020.

The Guardian reports:

The government seized control of key levers in the energy sector today in an attempt to kickstart a stalling “green energy” revolution and head off the threats of global warming and a rundown in North Sea oil.

Such a commitment from one of the world’s major economies means emissions-reductions efforts around the world will be made more credible. The scope of the British energy overhaul will also likely spur vital innovations in technology and in business practices. Consumers may be asked to contribute with more comprehensive energy conservation efforts, while industries will be required to move their energy sourcing toward zero-combustion technologies.

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Chasing the Rainbow: Wall St. Gambled on Fictional Expansion-potential

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The hardest thing to understand about the current, and deepening, economic crisis, is that it came about largely because some of the most experienced, well-staffed and prestigious financial institutions in the world gambled on untenable projects of unlimited expansion, without ever producing sound mathematics to back up the projections. Philosophical exuberance replaced philosophical underpinnings, and the dynamo of financial speculation greased the wheels of commerce in a way that masked underlying shortfalls.

It’s fair to say this is the hardest thing to grasp about how we got here, because it’s difficult to grasp no matter what angle you come at it from. Consumers are baffled that such expertise could not have seen what many did see, that there was not enough money behind the market valuations (in stocks, commodities and real estate) to back up the pricing and the accounting that was en vogue, for several years.

Meanwhile, the bankers themselves seem baffled, because even now, in the midst of financial and economic devastation, they still cling to the idea of an inherent validity to the claims that were so pervasive just a few years ago. Adjusting not only to the idea of sustained fallout from error and loss, but also, and perhaps more importantly, to the idea that the errors were rooted in the misapplication of market theory to financial “exotics” that were viable, but weren’t what their peddlers wanted them to be, is painful, and slow-going.

Many of the minds who more easily grasp this problem are in economics, not in finance, and the financial sector is still reeling from the news of its own mutability. Its heroes are not in fact “masters of the universe”, but individuals at play with forces far beyond their control, and which they may not sufficiently understand. And so, an overly serene approach to figuring the truth out of market dynamics could lead to missing the cues and to far more agonizing choices, in the midst of change, which markets, of course, are designed to bring.

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The Nature of Volatility is Not Gain or Loss, but Volatility

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Open.Salon.com :: The Dow Jones Industrial Average (DJIA/Dow) today had its single biggest day of gains in history, climbing 936 points. It could be a good sign, that on Friday the market “established a bottom”, but it’s important to remember: the nature of volatility is not that it is ripe for gain or ripe for loss, but that it is volatility, and one’s will and judgment are not always as relevant as one would like.

The Dow had its largest numerical point-gain, but also its 4th largest percentage gain, at over 11%. The S&P 500 and the NASDAQ also increased by more than 11%, ostensibly as a reaction to news that governments around the world had made a concerted effort to buy shares in troubled banks, possibly to help even healthy banks gain access to capital, by letting governments take a share, in exchange for some say in how they are run, and the right to sell at a later date.

The program would be “voluntary”, meaning no one is proposing a mass nationalization of banking assets, so there is no need to worry —if you’re in the financial industry— that the fundamental principles of a financial marketplace will be relegated to history by a wave of government decrees. But there is more than easy capital at play: there is the atmosphere of volatility, which favors certain investment mindsets.

In a time of unprecedented declines, there must be, logically, a few good bargains to be had, and nobody wants to lose out on those bargains. So the same rationale of fear and uncertainty that pushed people to sell and “get out” of the plummeting market last week —in turn driving the steep declines ever further— now may have motivated a return to buying, out of concern that great opportunities could be lost.

Morgan Stanley is reported to have gained 85% on its share value today alone. This may have to do with the deep uncertainty concerning the company’s future, its steep declines in recent weeks, and news last week that a deal to shore up its financial reserves may have fallen through. Today, it looked like the firm was in better condition, and the buy was a bargain-basement deal.

Morgan Stanley may be more stable than it was last week, during the worst losses in the Dow’s history (2,400 points, or 22% in one week), but the astonishing sudden increase in stock value is due to volatility, not to a lightning fast economic recovery or restoration of order to the banking system.

The DJIA is sometimes erroneously referred to as “the stock market”, as if there were no NYSE or any other exchanges or indices, and its daily point-total is counted as one of the most reliable measures of the performance of the New York Stock Exchange. But it is just one facet of what is now a global marketplace, and it has become one of the many tools for gauging what is happening in what is now a global banking crisis.

It is, in some ways, more important to acknowledge that this is a banking crisis, than to use terms like “economic” or “financial”, because banking underpins a lot of economic activity, but a banking crisis can be contained if banking reforms or interventions are well-planned and well-executed. And because the word “financial” often gives the impression of having to do with stock brokers, the art of the deal and “high finance” investment banking, but this crisis has come to permeate the banking sector broadly.

According to CNN:

On Monday, Neel Kashkari, assistant Treasury Secretary and interim head of the $700 billion bailout program – outlined some of the steps the government will take in the weeks and months ahead. The program includes buying soured mortgage assets from banks and buying stock in a number of financial institutions. (Full story)

Meanwhile, House Democrats are meeting Monday to put together a second economic stimulus package that could be worth $150 billion, although House Republicans are reportedly skeptical, CNN reports.

World leaders met over the weekend to come up with solutions. After an emergency meeting Sunday, 15 European nations agreed to help their troubled banks by adding capital and guaranteeing inter-bank lending. (Full story)

To put the problem of gain versus loss in the environment of a banking meltdown into perspective, the bleeding was not limited to “one or two bad actors” as karmic retribution for their ill-advised or unethical deeds, but spread like contagion to all corners of the global banking system, which had become overly dependent on the easy flow of new capital, through credit and investment insurance, some of which was flimsy or even non-existent (like the esoteric “credit default swaps”).

Now, we are looking headlong into a global government-backed buyout of “toxic assets”, financial instruments or even banking entities whose value relies heavily on unsustainable debt. That means there will be a wholesale revolution in the functioning of financial markets, and the goal will be to decrease volatility.

So, for now, the market is ripe for volatility, fraught with uncertainty, and prone to huge, historic swings, on the downside and on the upside. It will be necessary, from whatever point of view one takes, to remember that gains and losses on the stock market are both spurs and symptoms: they can represent underlying ills or dynamism, but also make things happen, like spur the collapse of otherwise viable firms or “lubricate” credit sources, for businesses, for investment and for consumers.

That, ultimately, is the goal, and it will be the coordinated respose to the crisis, not the volatile activity of the markets, that decides if credit becomes available more broadly.

US Recession Takes Root as Job-loss, Housing, Banking, Energy Crises Converge to Slow Growth

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CafeSentido.com :: The United States is firmly in the thrall of a banking meltdown, in which the normal structures, the means of measuring performance, and the meaning of debt-holdings, are all out of balance. More than one Wall Street firm or investment bank has written of tens of billions of dollars in uncollectable debt. Financier George Soros has published a book on the Great Credit Crisis. Economic growth figures have been worrying, with some seeing federal figures as “nudged” upward to avoid playing into a downward spiral of apprehension.

We have spent a year now debating if the nation is in a recession, closing in on recession or if recession were unavoidable at any given point, and throughout, we have heard that “two consecutive quarters of negative growth” equals recession. In fact, recession officially hits when the National Bureau of Economic Research finds “a significant decline in economic activity, spread across the economy, lasting more than a few months”. A recurring decline in growth, though still growth, can coincide with the conditions of a broad economic recession.

We can ask, for instance, when is a real estate market “unhealthy”, and thereby at risk for a sudden or ongoing decline in values? It is commonly argued that not until prices are in decline and foreclosures on the rise is the market in poor shape. But the symptoms of approaching collapse can be seen in the boom time, when values are dramatically inflated and the “bubble” effect becomes apparent: values are too high to continue rising, given the wealth available to finance that desired expansion.

In January 2005, Café Sentido (then Sentido.tv) reported on the apparent real estate bubble inflating over the UK economy. The Economist magazine had predicted an imminent fall the summer before. The lesson should be that signs of ill health were visible, and treatment did not come in time. In November 2007, The Hot Spring examined in its Quipu Economic Forum the mounting economic troubles related to real estate inflation and ‘predatory lending’.

The US, over this period, has been relying on three phenomena to sustain the appearance of consistent economic expansion: unsustainable levels of outstanding credit debt, a housing price bubble and massive new military expenditures for the war in Iraq. Huge profits to oil firms, coming from a crisis-driving, stratospheric and ongoing price-rise, helped cover up serious weaknesses in industry and trade, and costs to other businesses reliant on low oil prices, undermined the sustainability of what growth there was.

Then, the steep decline of the dollar, worth today just 42.8% of its best value against the euro (in 2001), spurred tourism and US exports, helping to obscure the mounting crisis. But the decline in American wealth resulting from the dollar’s slide means less spending power for acquiring foreign goods. It also means the low cost of goods manufactured overseas is not as dramatically low for the American consumer, undermining the cost-benefit of manufacturing arrangements that have moved millions of jobs overseas.

According to The New York Times, house prices must fall another 10% to 15% before the market will recover, if we consider the trends seen in past economic crises. That continued fall is projected to last 3 years, before we see prices start to rise again, adjusting for inflation and for the real value of the dollar. The diminishing dollar value has been able to allow for prices and spending increases that appear to signal economic expansion, as spending increases, even as expansion had come to mean escalating consumer debt, and stagnant wages meant the economy was building itself into a trend of stagflation, in which wages cannot keep pace with rising prices.

Between 1985 and 2002, the average home sold for roughly 14 times the annual rent one could charge for that same property in that market. By 2006, that figure was 25 times rental, meaning that renting a property would pay it off only after 25 years, if one had zero interest over the life of a mortgage. So owning to rent was only 56% as sustainable as was the norm from 1985 to 2002.

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Food price crisis: more complex than first thought & putting food beyond the reach of the planet's poor

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FEATURE FROM SUSTAINABLE DEVELOPMENT UPDATE, ISSUE 3, VOLUME 8, 2008

Fredrik Moberg/Miriam Huitric, Albaeco :: Food prices are skyrocketing. Initially, many put the blame on the rising demand of biofuels in the transport sector, but bio-ethanol is far from the only thing driving up food prices. New diets, soaring oil prices and climate change are all in the complex soup of explanations behind the recent development putting food beyond the reach of the planet’s poor.


The price of wheat has doubled in less than a year.
Photo: Wen-Yan King: medapt.org, azote.se

More than 800 million people are still undernourished in the world today. The Haitian riots over soaring food prices in April this year were a startling reminder of the inequalities between developed and developing countries – with the latter feeling the impact of the growing global food crisis in ways that go beyond the imagination of most people living in developed countries.

The price of wheat has doubled in less than a year and prices for milk and meat have more than doubled in some countries. International nominal prices of all major food commodities are at the highest levels in nearly 50 years. While this crisis is real – so much so that the UN’s Food and Agriculture Organisation (FAO) recently held a High-Level Conference on World Food Security: the Challenges of Climate Change and Bioenergy – its causes are not so clear.

Initially, many put the blame on bio-ethanol and claimed that food prices were surging because we have chosen to feed our cars instead of feeding human beings (see SDU Issue 4/2007). Lately, however, the discussions have broadened to also include a whole set of other explanations. A recent post on the ecogeek weblog was right to the point: “All-in-all, it’s not a good time to be burning what can otherwise be eaten. But there is no good reason to say that biofuels are the one and only problem. SUV’s are certainly limiting the future of the world, but not by burning hungry people’s food.”

Six major factors behind the rising food prices

  • Soaring fossil-fuel prices (needed to produce fertilizers, pesticides and for transportation)
  • Emerging economies and Westernisation of diets (rich people eat more and buy more meat and milk that increase demand for grains to feed livestock)
  • Population growth (food demand growing faster than supply)
  • Climate change (drought, more frequent flooding etc already beginning to have significant impact on agricultural production)
  • Use of crops for fuel (shifting production from food to biofuels)
  • Market speculation (investors from traditional markets now focus on financial products tied to agriculture commodities as food prices increase)

Even more recently, however, the British daily “The Guardian” claimed to have obtained a confidential World Bank report that claims that biofuels are the main cause and have forced global food prices up by 75% – far more than previously estimated (at the other extreme, the US Government says it is less than 3%).

Key causes of the soaring food prices
Until recently global production of food matched demand. In fact, for a rather long period of time there has been an excess of production in many parts of the world. These surpluses have often been “dumped” at low prices in developing countries with disastrous impacts on national farmers who could not compete with the low prices offered. This was until recently. Demand now seems to have passed the tipping point where it exceeds production, according to several experts.

Another key aspect to consider when trying to understand the food price crisis is drought, which is predicted to increase in frequency and severity as the climate changes. In 2007, prices soared to a large extent due to failed crops in the drought stricken fields of Australia’s food bowl that are central to the worldwide price of grains.

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Renewable Energy Consumption & Electricity Preliminary 2007 Statistics

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TRANSCRIPT OF ENERGY INFORMATION ADMIN. REPORT ON RENEWABLE ENERGY CONSUMPTION

Data For: 2007
Report Released: May 2008
Next Release Date: May 2009

Renewable energy consumption declined 1 percent between 2006 and 2007 to 6,830 trillion Btu, according to preliminary 2007 data (Table 1 and Figure 1).  In contrast, both total energy and non-renewable energy increased 2 percent.

There was wide variation in the consumption behavior of individual renewable energy sources. Hydro electricity dropped 14 percent in 2007 due to reduced precipitation in several regions of the country. On the plus side, biomass-based energy grew 7 percent and wind-generated electricity jumped 21 percent (Table 3). Major increases in consumption of biomass to produce and use biofuels (ethanol and biodiesel) were almost entirely responsible for the increase in biomass during 2007 (Table 1).

From 2003 through 2007, renewable energy consumption’s average annual growth rate was 3 percent, compared with just 1 percent for total energy consumption. Again, biofuels and wind were largely responsible for the increase, with 5-year average annual growth rates of 25 and 29 percent, respectively.

Just over half of renewable energy consumption occurred in the electric power sector in 2007 (Table 2). The industrial sector was the second-leading consumer of renewable energy, accounting for nearly 30 percent. The transportation, residential, and commercial sectors accounted for 9, 8, and 2 percent, respectively. While the electric power sector currently consumes the most renewable energy (51 percent), its use dropped 8 percent between 2006 and 2007. In 2003, the electricity sector accounted for 59 percent of total renewable energy consumption.

In contrast, transportation sector renewable energy consumption increased 30 percent during 2007, and residential sector consumption grew 12 percent. Residential sector growth was due to healthy increases in all three energy sources: biomass, geothermal, and solar/photovoltaic. Commercial and industrial uses of renewable energy changed little between 2006 and 2007 and have also changed little as a fraction of total renewable consumption since 2003. That could change for the industrial sector if ethanol and biodiesel use continues to grow rapidly resulting in increased feedstock consumption. This is especially significant in view of the fact that the largest biomass fuel consumed in the industrial sector, wood and derived fuels, has grown little since 1989 and appears to have peaked in 1997.[1]

Within the electric power sector, wind energy consumption has grown each year since 1998.[2] From 2003 to 2007, wind’s share of total renewable energy consumption increased from 2 percent to 5 percent. For the first time ever in 2007, wind energy consumption in the electric power sector exceeded geothermal. Hydro electricity accounted for 36 percent of total renewable consumption in 2007, down from 46 percent in 2003. However, hydro consumption is tied mostly to precipitation, which can vary year to year. Few plants are being built or retired.

Electricity generation from renewable sources fell 9 percent in 2007 to 351 billion kilowatthours (kWh), largely due to reduced precipitation (Table 3). Excluding hydro electricity, however, renewable electricity generation grew 7 percent. This gain was led by a 21 percent increase in electricity from wind and moderate increases in electricity from biomass waste. There has been little change in generation from the largest non-hydro renewable electricity source, wood and derived fuels, since 2003.

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Pres. Bush Lifts Executive Ban on Offshore Oil Drilling, Challenges Environmentally-minded Congress

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US pres. George W. Bush has lifted the executive ban on offshore oil drilling on the Outer Continental Shelf (OCS), and has challenged the US Congress to act to open the OCS to new oil exploration, saying the US needs to increase domestic production to reduce its dependence on imported oil. The ban was put in place by his father, George H.W. Bush, the 41st US president, for environmental concerns and in part because the oil companies have leases for huge expanses of underwater terrain they have not explored or exploited.

Critics say lifting the ban will have little to no effect, short or long-term on the price of crude oil or on gasoline at the pump, in part because the US is not part of the OPEC cartel that sets production rates and prices, and in part because it will take so long for any of the new production to come online. Opponents in Congress have said it is just a ploy to put political pressure on Democrats in an election year when gas prices are high.

Both presidential candidates have made a point to repeatedly state their intention to provide heavy increases in funding for the development of alternative energy sources. Sen. John McCain, however, has said he backs lifting the ban, and he has backed policy intervention to alter the price of gasoline, like lifting the federal gas tas temporarily. Sen. Obama has often talked of the need to tap America’s resources, but he supports maintaining the ban.

The truth of the matter at present is that there is no known way for offshore drilling to bring oil prices down to sustainable levels, as the projected rise in global demand far outstrips the expected production capacity of the US offshore reserves. As evidenced by oil tycoon T. Boone Pickens’ massive national campaign for wind-power, only by changing the structure of our national energy economy can we bring energy and transport-fuel prices back within reach of the average consumer.

As reported by The Hot Spring last week:

Special transparent dyes coating glass or plastic panes concentrate the Sun’s rays, guiding them to solar-voltaic cells lining the edges, allowing a window to act as a solar panel with 10 times the electricity generation capacity of solar cells, by current standards. The ‘organic solar concentrator’ (OSC) system also reduces cost, by reducing the surface area that needs to be coated by solar-voltaic cells and by eliminating the need for large concentrating mirrors and sun-tracking mechanisms.

In line with this information, and because climate scientists, US courts, international treaties, and American law, all suggest that we move toward a long-term ongoing decline in carbon emissions, the US Congress continues to oppose lifting the ban, which they would have to do with new legislation. According to the San Francisco Chronicle:

On the surface, President Bush’s decision Monday to lift the presidential moratorium on offshore drilling – a policy initiated by his father and extended by Bill Clinton – appeared only to embolden Democrats in their efforts to preserve the 27-year-old federal ban.

Congress has renewed its ban on drilling on the Pacific and Atlantic coasts every year since 1981, and top Democrats said Monday they will do so again this year, despite the pressure from Bush. House Speaker Nancy Pelosi called Bush’s action a hoax that “will neither reduce gas prices nor increase energy independence.”

Coming just days after the EPA announced it would not institute caps on carbon emissions this year, the executive action is likely to intensify political attacks related to the issue of energy production and oil prices. Pres. Bush has sought to blame Congressional Democrats’ opposition to drilling offshore and in the Arctic National Wildlife Refuge (ANWR) in Alaska for the recent upsurge in oil prices. Since that policy has not changed in nearly 3 decades, it is hard to see the immediate cause and effect.

If we look for geopolitical causes, we find ongoing chaos in Iraq, threats of a possible military action against Iran, Iran’s threat to close the Strait of Hormuz, interrupting potentially more than one-third of the world’s oil traffic, a rogue regime in Sudan and a surge in sabotage on Nigerian oil fields. On the economic front, we have the collpase of major financial institution in the US, the dollar now worth less than half its 2001 value against the euro, and the predicted approach of peak oil production.

Rep. Lois Capps (D-CA) wrote on the issue:

a report last year threw cold water on the idea of new offshore drilling as the way to lower gas prices. It said that new offshore drilling “would not have a significant impact on domestic crude oil and natural gas production or prices before 2030″ and that the impact on prices would be “insignificant.”

Pres. Bush’s own Energy Information Administration issued that report. Rep. Capps went on to note that “the oil and gas industry is sitting on 68 million acres of public lands where it could be drilling but isn’t. It has some 6,000 leases in the Gulf of Mexico (where the majority of oil and natural gas reserves are found) that are not being explored.”

The argument that oil and natural gas firms would gladly lower prices if only they were given access to drillable reserves does not hold up, if we consider that they are not doing this now, though they can. So the summer will likely see a heated contest for public support between Congressional conservationists and the Bush White House, with Senators McCain and Obama squaring off as spokespeople for the competing points of view, but something other than future drilling will have to be done to lower prices at the pump.

Transparent Dyes Allow Windows to Act as Super-powerful Solar Panels

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Special transparent dyes coating glass or plastic panes concentrate the Sun’s rays, guiding them to solar-voltaic cells lining the edges, allowing a window to act as a solar panel with 10 times the electricity generation capacity of solar cells, by current standards. The ‘organic solar concentrator’ (OSC) system also reduces cost, by reducing the surface area that needs to be coated by solar-voltaic cells and by eliminating the need for large concentrating mirrors and sun-tracking mechanisms.

According to the journal Science, where the findings were published:

Light is absorbed by the coating and reemitted into waveguide modes for collection by the solar cells. We report single- and tandem-waveguide organic solar concentrators with quantum efficiencies exceeding 50% and projected power conversion efficiencies as high as 6.8%. The exploitation of near-field energy transfer, solid-state solvation, and phosphorescence enables 10-fold increases in the power obtained from photovoltaic cells, without the need for solar tracking.

The Economist is using the term ‘luminescent solar concentrator’, and notes that the work reported by Michael Currie and Jonathan Mapel of the Massachusetts Institute of Technology (MIT) is being researched elsewhere as well, and is related to the standard functioning of fiber optic technologies, which concentrate light and contain it within a conductive glass or plastic fiber. The OSC system conducts light toward the edges of the glass or plastic pane, trapping photons within the pane, causing it to seek out the high-efficiency solar-voltaic cells at the panel’s edge.

There are technical complications with perfecting the OSC system for harvesting solar energy. The dyes capture and concentrate the incoming sunlight, but an excess of dye molecules may prevent a quantity of light from reaching the circumferential solar cells, either by re-absorbing the light or by allowing heat to accumulate and losing the energy through that concentration of heat on the dyed surface.

The EE Times reports that the “edge-mounted” solar cells could receive light concentrated as much as 40 times. With the extreme heightening of efficiency, and the attendant reduction of costs, related to the new panels’ lack of need for mirrors or solar tracking mechanisms, the MIT advance could revolutionize the role of solar power in the global energy economy.

The dye-based solar concentrators could be on the commercial market within three years, distributed widely and helping homeowners and businesses establish productive capacity in linking up with the spreading renewables grid. Consumers with solar and wind-generation capacity can earn money on energy fed back into the local electricity grid.

The solar concentrating dye-coating can also be applied to exiting solar cells, heightening their light-capturing capability by as much as 30%, according to the MIT team. Marc Baldo, an MIT engineer, says “We think that ultimately this approach will allow us to nearly double the performance of existing solar cells for minimal added cost.”

While obstacles to containing and harvesting the full amount of energy captured by the dyes are an issue, Baldo’s team went far beyond previous attempts at increasing the efficiency of solar cells with the dye-retransmit method, by coating only the surface of a glass pane with the dyes, mimicking techniques used to improve the efficiency of lasers, which also contain and bounce light to intensify the retransmission of light at the other end of the contained space.

Wind Power Set to Become World's Leading Energy Source

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Lester R. Brown, EPI :: In 1991, a national wind resource inventory taken by the U.S. Department of Energy startled the world when it reported that the three most wind-rich states —North Dakota, Kansas, and Texas— had enough harnessable wind energy to satisfy national electricity needs. Now a new study by a team of engineers at Stanford reports that the wind energy potential is actually substantially greater than that estimated in 1991.

Advances in wind turbine design since 1991 allow turbines to operate at lower wind speeds, to harness more of the wind’s energy, and to harvest it at greater heights —dramatically expanding the harnessable wind resource. Add to this the recent bullish assessments of offshore wind potential, and the enormity of the wind resource becomes apparent. Wind power can meet not only all U.S. electricity needs, but all U.S. energy needs.

In a joint assessment of global wind resources called Wind Force 12, the European Wind Energy Association and Greenpeace concluded that the world’s wind-generating potential —assuming that only 10 percent of the earth’s land area would be available for development— is double the projected world electricity demand in 2020. A far larger share of the land area could be used for wind generation in sparsely populated, wind-rich regions, such as the Great Plains of North America, northwest China, eastern Siberia, and the Patagonian region of Argentina. If the huge offshore potential is added to this, it seems likely that wind power could satisfy not only world electricity needs but perhaps even total energy needs. (See data http://www.earth-policy.org/Updates/Update24_data.htm)

Over the last decade wind has been the world’s fastest-growing energy source. Rising from 4,800 megawatts of generating capacity in 1995 to 31,100 megawatts in 2002, it increased a staggering sixfold. Worldwide, wind turbines now supply enough electricity to satisfy the residential needs of 40 million Europeans.

Wind is popular because it is abundant, cheap, inexhaustible, widely distributed, climate-benign, and clean–attributes that no other energy source can match. The cost of wind-generated electricity has dropped from 38¢ a kilowatt-hour in the early 1980s to roughly 4¢ a kilowatt-hour today on prime wind sites. Some recently signed U.S. and U.K. long-term supply contracts are providing electricity at 3¢ a kilowatt-hour. Wind Force 12 projected that the average cost per kilowatt hour of wind-generated electricity will drop to 2.6¢ by 2010 and to 2.1¢ by 2020. U.S. energy consultant Harry Braun says that if wind turbines are mass-produced on assembly lines like automobiles, the cost of wind-generated electricity could drop to 1-2¢ per kilowatt hour.

Although wind-generated electricity is already cheap, its cost continues to fall. In contrast with oil, there is no OPEC to set prices for wind. And in contrast to natural gas prices, which are highly volatile and can double in a matter of months, wind prices are declining.

Another great appeal of wind is its wide distribution. In the United States, for example, some 28 states now have utility-scale wind farms feeding electricity into the local grid. While a small handful of countries controls the world’s oil, nearly all countries can tap wind energy.

Denmark leads the world in the share of its electricity from wind —20 percent. In terms of sheer generating capacity, Germany leads with 12,000 megawatts. By the end of 2003, it will have already surpassed its 2010 goal of 12,500 megawatts of generating capacity. For Germany, this rapid growth in wind power is central to reaching its goal of reducing carbon emissions 40 percent by 2020.

Rapid worldwide growth is projected to continue as more countries turn to wind. In addition to the early leaders —Denmark, Germany, Spain, and the United States— many other countries have ambitious plans, including the United Kingdom, France, Brazil, and China.

In densely populated Europe, the off-shore potential for developing wind is also being exploited. Denmark is now building its second off-shore wind farm, this one with 160 megawatts of generating capacity. Germany has some 12,000 megawatts of off-shore generating capacity under consideration.

Wind power is now a viable, robust, fast-growing industry. Cheap electricity from wind makes it economical to electrolyze water and produce hydrogen. Hydrogen is the fuel of choice for the highly efficient fuel cells that will be used widely in the future to power motor vehicles and to supply electricity, heating, and cooling for buildings. Hydrogen also offers a way of storing wind energy and of transporting it efficiently by pipeline or in liquefied form by ship.

With the wind industry’s engineering know-how and manufacturing experience, it would be relatively easy to scale up the size of the industry, even doubling it annually for several years, if the need arose. If, for example, crop-shrinking heat waves raise food prices and generate public pressure to quickly reduce carbon emissions by replacing coal and oil with wind and hydrogen, it will be possible to do so. If the need arises to shift quickly to hydrogen-fueled automobiles, this can be done by converting
gasoline-burning internal combustion engines to hydrogen with inexpensive conversion kits.

For energy investors, growth in the future lies with wind and the hydrogen produced with cheap wind-generated electricity. Solar cell sales are growing at over 30 percent a year and are likely to supply much of the electricity for the 1.7 billion people who are still without electricity, most of them living in developing country villages. But solar cells are still too costly to supply the vast amounts of energy required to power a modern economy.

World coal burning peaked in 1996 and has fallen 2 percent since then. It is a fading industry, not an exciting investment prospect. Nor is oil particularly promising, since world production is not likely to expand far beyond current levels. Production of natural gas, the cleanest and least climate-disruptive of the fossil fuels, is likely to continue expanding for a few more decades, fortuitously developing an infrastructure that can be adapted for hydrogen. Nuclear power generation is expected to peak soon, when the large number of aging plants that will be closing down will exceed the small number of plants that are under construction.

The energy future belongs to wind. The world energy economy became progressively more global during the twentieth century as the world turned to oil. It promises to reverse direction and become more local during the twenty-first century as the world turns to wind, wind-generated hydrogen, and solar cells. Wind and wind-generated hydrogen will shape not only the energy sector of the global economy but the global economy itself.

Originally Published: June 25, 2003
(http://www.earth-policy.org/Updates/Update24.htm)
Reproduced here by Permission of Earth Policy Institute
Copyright © 2003 Earth Policy Institute