How will cheap energy affect the economy?

[Posy McPostface]

I've been following a lot of news and articles about various technologies potentially providing abundant energy at dirt cheap prices. I don't want to advocate about any single technology that will provide cheap and abundant energy; however, it is becoming more and more clear that renewables will reshape the energy sector.

It's easy to get off topic; but, I was interested in how the economy will be shaped or transformed by the reduction in prices of energy costs. So, what will be a result of this in your opinion?

 

[tech99]

I've been following a lot of news and articles about various technologies potentially providing abundant energy at dirt cheap prices. I don't want to advocate about any single technology that will provide cheap and abundant energy; however, it is becoming more and more clear that renewables will reshape the energy sector.

It's easy to get off topic; but, I was interested in how the economy will be shaped or transformed by the reduction in prices of energy costs. So, what will be a result of this in your opinion?

Off shore wind is now cheaper than nuclear in the UK. It looks as if the shape of the electricity network will completely alter, with many houses and commercial premises producing power and using storage batteries, which are now catching on, even for the average house. A typical house battery is the size of a small refrigerator, and a solar farm for 15,000 homes might require something the size of two containers.. The grid which has been based on a few large power stations will change completely. Further, the large scale use of electric cars and home batteries will provide a means of switching things off at peak moments. The drop in TV usage has also removed the peaks during evenings.
The re-jigging of the complete network, including the software which will be required to manage a complex configuration, will create opportunities for business, and the know how in alternative energy will boost exports. Looking further ahead, the considerable health costs from coal and oil generation and from diesel vehicles will reduce.

 

[Posy McPostface]

Yes, the energy sector itself will change dramatically. But, I was wondering about other sectors of the economy. Like agriculture, for example.

 

[russ_watters]

I've been following a lot of news and articles about various technologies potentially providing abundant energy at dirt cheap prices. I don't want to advocate about any single technology that will provide cheap and abundant energy; however, it is becoming more and more clear that renewables will reshape the energy sector.

It's easy to get off topic; but, I was interested in how the economy will be shaped or transformed by the reduction in prices of energy costs. So, what will be a result of this in your opinion?

I think the premise here is a bit flawed; almost all alternate energy sources require huge subsidies because they are much more expensive than conventional sources. Meanwhile fossil fuels have gotten substantially cheaper due to fracking.

...regardless, cheaper energy is good for the economy as a whole.

 

[russ_watters]

Yes, the energy sector itself will change dramatically. But, I was wondering about other sectors of the economy. Like agriculture, for example.

Are you asking if other sectors will use more energy as it gets cheaper? Maybe but due to policy and politics i think that is unlikely. The biggest reverse conservation trend I've seen is cheap gas resulting in more suv sales.

 

[Posy McPostface]

I think the premise here is a bit flawed; almost all alternate energy sources require huge subsidies because they are much more expensive than conventional sources. Meanwhile fossil fuels have gotten substantially cheaper due to fracking.

Well, that would be true if you considered that fossil fuels get subsidies too, more than renewables.

...regardless, cheaper energy is good for the economy as a whole.

Well, yes. Although there is a lot of information on the web it's still unclear to me how much of an impact solar or other renewables will have on the economy. What I might be alluding to is some form of terraforming that cheap energy would enable.

Are you asking if other sectors will use more energy as it gets cheaper? Maybe but due to policy and
politics i think that is unlikely. The biggest reverse conservation trend I've seen is cheap gas resulting in more suv sales.

Yes, I suppose that productivity would rise, but as you say due to efficiency gains and not cheaper energy, is that correct?

 

[Mark44]

Well, that would be true if you considered that fossil fuels get subsidies too, more than renewables.

Do you have any evidence supporting this claim? From what I see, fossil fuels, including coal, natural gas, and oil, don't get any subsidies.

 

[Posy McPostface]

http://www.sciencedirect.com/science/article/pii/S0305750X16304867

Highlights•
Fossil fuel subsidies are large, amounting to 6.5% of global GDP in 2015.

•
Mispricing from a domestic perspective accounts for the bulk of the subsidy.

•
Coal subsidies account for the largest part (about half) of global subsidies.

•
In absolute terms, subsidies are highly concentrated in a few large countries.

•
The environmental, fiscal, and welfare gains from subsidy reform are substantial.

Not accounting for negative externalities can also be seen a silent subsidy, also.

 

[russ_watters]

Well, that would be true if you considered that fossil fuels get subsidies too, more than renewables.

It's true that fossil fuels get subsidies and many are hidden/indirect, such as the Iraq war and paying for the health impacts of coal. But this thread is about how prices have/might drop and these subsidies don't have as direct an impact because they are indirect. For example, the Iraq War ended, so you can say the "subsidy" ended. Did that cause oil to get more expensive? No, it's gotten cheaper. Why? Because the Iraq war's impact was indirect at best (and indeed may have increased oil prices instead of decreasing them) so lifting the subsidy didn't hurt perceptibly and other more direct forces caused the drop.

That said, while anti-fossil fuel advocates highlight the indirect subsidies, they do also tend to ignore the indirect penalties/sanctions, which are also substantial. Indeed, the only energy source that is essentially all penalties (direct and indirect) and no subsidies is nuclear power (caveat: loan guarantees are kind of a subsidy that happens if a project fails). All others, even popular alternate energy, get a mixture of subsidies and penalties/sanctions.

With "alternate" energy sources, on the other hand, direct subsidies are required because these sources are expensive, which also means that as they get cheaper due to technology, the subsidies will be lifted and so the direct costs of the implementations won't drop. In other words, if solar power gets cheaper it won't mean you can install a solar array for less, it just means your taxes will go down a little.

Don't fret this issue though; it doesn't have a direct bearing on your question, it just means you may not be as happy about lower energy prices as you are hoping to be.

What I might be alluding to is some form of terraforming that cheap energy would enable.

Terraforming? You mean making another planet habitable? I don't see how that has anything to do with energy prices.

Yes, I suppose that productivity would rise, but as you say due to efficiency gains and not cheaper energy, is that correct?

No, I'm saying that unfortunately cheaper energy causes people to waste energy. It causes efficiency drops, not efficiency gains.

 

[Posy McPostface]

this thread is about how prices have/might drop and these subsidies don't have as direct an impact because they are indirect.

Then the question seems to be, to what degree do those indirect subsidies affect the final price of coal, oil, and natural gas, so it would seem. It doesn't seem rational to me to have subsidies on top of other subsidies to make something more competitive than the alternative.

No, I'm saying that unfortunately cheaper energy causes people to waste energy. It causes efficiency drops, not efficiency gains.

Is that a bad thing? I don't think it's an issue if productivity rises.

EDIT:
Anyway, I think I went off on a tangent.

 

[Posy McPostface]

I've been talking with my friend who is rather right of the political pendulum, and he brings up a valid point. Namely, that claiming negative externalities are not a sufficient reason to call something a subsidy.

Does his argument have any merit or is the study I linked still solid?

I like playing devil's advocate with any position I hold. Endless fun, really.

 

[jackwhirl]

I've been talking with my friend who is rather right of the political pendulum, and he brings up a valid point. Namely, that claiming negative externalities are not a sufficient reason to call something a subsidy.

Does his argument have any merit or is the study I linked still solid?

That is not an argument. It is a negation of the original proposition. An argument would be that, plus the bits that follow explaining his reasoning.

 

[Posy McPostface]

That is not an argument. It is a negation of the original proposition. An argument would be that, plus the bits that follow explaining his reasoning.

Do you agree with his position, then?

 

[jackwhirl]

Do you agree with his position, then?

No. I was just trying to say that if that is the extent of his position, and he didn't provide any supporting arguments and reasons, then it's like... like that scene in the Emperor's New Groove, where the kids yell "nuh-uh" and "yuh-huh" back and forth. This feels a little unkind to say so I want to be sure, maybe you left off some of his evidence or reasoning for the statement?

Why does he think that unaccounted negative externalities don't qualify as a subsidy?