Something I never fail to stress in my formal lectures or informal harangues is the value of moderately priced electricity in an industrial economy, and on this score Sweden was once in the forefront of world economies.

Unfortunately, that lovely  arrangement turned out to be unacceptable to the local anti-nuclear booster clubs, who together with  self-appointed energy experts have unleashed a  torrent of lies and misunderstandings about nuclear energy that eventually resulted in the bad news for consumers of electricity that  sometimes characterizes the Swedish electric market. During the last few years, the price of electricity to households in Sweden has occasionally been extremely high, although – wisely –  electricity may still be sold to Swedish industries at a lower price.

What about other countries and the price of electricity to industries. Lakshmi Mittal, chairman and CEO of Arcelor-Mittal – a global steel producer – points out that while the European (EU) bosses and experts admit that manufacturing industry is a motor for economic growth in Europe, at the same time they punish the energy intensive industries by not sponsoring a comprehensive energy policy that will help promote competitiveness and growth. What in economic theory would be called an ‘optimal’ energy policy, which is a policy that promotes both  consumer and producer satisfaction, given the available technology, and also education (and motivation) of the work force.

Of course they don’t sponsor one, and why should they? They don’t know what a comprehensive energy policy is, and moreover, in Mittal’s article in the Financial Times (2014), there was not a word about nuclear energy, but a reminder that his organization provides steel  for wind farms and solar energy installations. That achievement is nothing less than wonderful, but doesn’t Mr Mittal understand that where energy matters are concerned, the majority of persons in or associated with the EU Energy Directorate are unqualified when the subject is energy economics, and it is futile to expect that they desire or are capable of absorbing the kind of background in that subject needed to understand or help his company,

Mittal said that forthcoming proposals for a European Energy and Climate Framework would block rather than foster what he calls “the reindustrialisation” of Europe. His suggestion is that the European Emissions Trading System, which is supposed to control greenhouse gas emissions by the use of ‘permits’, should be “addressed”, by which he probably means reformed.

I once studied that scheme, and came to a conclusion that abandonment made more sense than reformation. He also endorses the “sustainable decarbonisation of the power sector”, proposing  global negotiations whose purpose – I assume – involves sharing the expense of decarbonisation, This sounds beautiful to me, assuming that the EU Political Directorate does not take part in the  process. Mr Mittal’s  concern with restricting CO₂ emissions, and making sure that power users pay only their fair share of the expense in doing so is absolutely acceptable, although his talk about turning electricity generation over to renewables is looney-tune if the fraction of renewables in Europe is to be raised  to the level  recommended by the government of Ms Merkel, or for that matter the absurd scheme of the present French Energy/Environment Minister.

Before continuing, I would like to inform readers that in Sweden, and perhaps elsewhere, one of the reasons why nuclear energy is so unpopular is that physicists are often (and perhaps always) rated at the top of the intellectual scale. Many of them not only possess the scientific training that impresses a majority of civilized human beings, but  also – and as a result –  enjoy the personalities, charisma and self-confidence that allow them to dominate both smaller and larger gatherings. They flourish the credentials of a natural elite in a world in which elite is becoming a dirty word. 

For instance, it is difficult to associate the clumsy lies and  misunderstandings about scientific topics concocted by the people that Mr Mittal must deal with at EU headquarters with the smooth delivery of conventional scientific wisdom often displayed by physics stars, or for that matter foot soldiers in that profession who have learned to walk the walk and talk the talk of Nobel Laureates. Learned  it by reading the right books, and reading them over and over until they know everything in the chapters that interest them perfectly.  

If we take a careful look at the time series of global macroeconomic growth from the end of the second world war (WW2) to the present, we can distinguish two distinct segments. The first is comparatively smooth, and stretches from the end of WW2 until the middle of the l970s, or shortly after oil prices began to increase in an unaccustomed manner. 

The second segment, from the middle l970s to the present, which  I discuss briefly in my forthcoming energy economics textbook (2014), featured an irregular growth that doubtlessly resulted from the occasional drastic increases in energy prices that began with the first oil price shock, and whose impact effect was a slowdown in the rate of productivity growth in almost every industrial country. A kind of ‘sneak preview’ of the macroeconomic meltdown that would take place in 2008. Another consequence of the energy price rise – i.e. oil plus other energy resources –  was stagflation, or the simultaneous occurrence of inflation and increased unemployment.

Unless national energy structures are ‘adjusted’, these miseries might accelerate if the prices of the main fossil fuels begin to escalate, which is a misfortune that I consider likely, though perhaps not in the short run, and which I prefer not to elaborate on here. I will suggest however that this judgement particularly applies to oil and natural gas, and will likely be due to  geopolitical rather than geological causes.

The optimal adjustment would involve introducing a large amount of efficient renewables and alternatives, as well as maintaining the presence of nuclear, increasing its efficiency, and eventually adopting the next generation of reactors and its variants in both present and smaller sizes. I also think it ‘politic’ to assume that nuclear will be an indispensable complement to (and not substitute for) any conceivable mix of renewables and alternatives, although the optimal or nearly optimal mix of renewables and alternatives is completely unknown to this humble teacher of energy economics, and is something that readers of this note, as well as their friends and political representatives should think about investigating in depth as soon as possible.            .

As Sigmar Gabriel, Germany’s economy and energy minister, made clear, “we have reached the limit of what we can ask of our economy.” What he meant – but perhaps could not say –  was the limit of what could be asked if the proposed liquidation of nuclear energy in his country becomes a reality. Gabriel also said that energy generated from biomass was too expensive, which it might be for Germany, but not for every other country, and he also claimed that “Germany had been financing the learning curve on renewable energy for other European countries”. That was a cute observation, following which he implied that the cost of this activity was no longer bearable for German voters.

If that is true, then other countries should not make the mistake of trying to assist them. Instead, exporters of electricity to Germany should attempt to reintroduce German voters to reality rather than the senseless fantasy of their counter-productive energiwende. According to a Belgium researcher who visited Sweden, a fulfilled German nuclear retreat could mean electricity rationing in countries exporting electricity to Germany. Thanks for nothing, Germany, and regards should also go to  local politicians who have decided that half-baked trivialities are more important than dealing with this menace to incomes and welfare in their countries!

REFERENCES

Banks, Ferdinand E. (2014).  Energy and Economic Theory. Singapore, London and New York: World Scientific.

Mittal, Lakslumi (2014). ‘Rewrite energy policy and reindustrialize Europe’. The Financial Times (January 21).