Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. But I can't by law give you advice, and I do make mistakes. Remember: the unexpected sometimes happens. Oddly enough, the expected does too, but all too often it takes longer than you thought it would, or on the other hand happens more quickly than you expected. The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Tuesday, March 21, 2017


Why would the number of extremely hot days rise by a much larger percentage than the rise in average temperatures?

It's to do with the shape of the statistical distribution.  Let's suppose that the average temperature for a season or a year is X, and that the observations are normally distributed.  That means that the number of times  the temperature is X-10, X-9, X-8 ...... X+8, X+9, X+10 (just as an example)  starts out with very few times it's X-10 (or X+10), a few more times when it's X-9 (or X+9), still more times it's X-8 (or X+8), in a shape which is reminiscent of a bell.  The normal distribution is often called the bell curve because of this.

There are other distributions which are skewed to one end of the curve or the other, which means that they are asymmetrical.  For example, wealth is very asymmetrically distributed: there are far fewer rich people who own most of the wealth, and lots of poor people who own little.  But observations for weather tend to be symmetrically distributed, but because of global warming, they have drifted over time.  The distribution is still bell-shaped but the mean  (the average) has shifted higher.  And that means that the "tails" of the bell shape have also shifted.  So whereas in the old days you had say 1 very hot day 3 days a year, 1 % of the time, now you have 2 or 3 or 4 times as many very hot days.  Similarly, in the old days you used to get 1 very cold day 3 days a year, now you get none.  The graphic below demonstrates this principle very nicely.


Lots of people think that a rise of 1 degree C in average temperatures is small, because they are used to the shifts in temperature from day to night, and from winter to summer, which are obviously much larger.  But what global warming means is that we will have far more hot days in summer, with temperatures reaching and exceeding new highs more often and by more.  We have just seen this in our Australian summer, and they've just seen this in the US, where February heat has been at July levels,  If the mean, and its whole distribution shifts still higher the number of super hot days will double or treble or quadruple, with devastating consequences for us and for our world.

Monday, March 20, 2017


I can't read the signature, so I can't tell you which cartoonist drew this marvellous cartoon.

Sunday, March 19, 2017

Hope and despair


When I look at the problem of global warming I alternate between hope and despair.

There's hope,  because the costs of wind and solar and concentrated solar power and batteries and electric cars are all falling, some precipitously, and many are now cheaper than their fossil fuel equivalents, and if they're not, they soon will be.  The old argument by the Right was that renewables were so costly that if we installed them, the economy would suffer, and living standards would fall.  You can see the most cynical and dishonest version of this argument when they claim, with crocodile tears, that  the desperate millions of India/Africa/you name it are being consigned to further poverty because we Lefties want to stop using coal.  Just for the record, that's a feeble as well as a dishonest argument: the cheapest way to bring electricity to the 24% of India's population who don't have it now is via mini-solar panels with batteries and LED lights.   And anyway, utility-scale renewables are cheaper than coal in India, even leaving out the significant environmental and health costs of coal.  Almost everywhere, renewables are cheaper than coal and comparable to gas.  And renewables are still falling in cost, so the gap with fossil fuels will only widen.  In a rational world, we would be embracing them with joyous cries.

This year the sticker price of EVs will match the average price of petrol cars.   There will still be cheaper cars to buy than EVs: the cheapest new cars sell for around $16,000.  Electric cars with 200 miles/320 kilometres of range will still cost more than that in 2020.  But by 2025 even cheap petrol cars will be cheaper than EVs.  As they're already much cheaper to run, people will stop buying petrol cars and buy only EVs.  Which means that by 2030 or 2035 emissions from oil in transport will have fallen dramatically.

All good.  Except.

The rate of increase in global temperatures seems to be accelerating.  I know climate scientists will point out that we have too few data points, and they're right.  But if it were a share price or GDP, I would says that it was accelerating, because you can't wait for 100% confirmation in markets before you move.  And the same applies to policy:  governments can't wait either.  They need to accelerate the switch to renewables.  This summer in Australia, for the first time, I was really afraid of the heat.  It was relentless and unforgiving.  Fruit bats in South Australia died in their trees, from the heat.  The electricity grid across eastern Australia came close to failing several times because of the demand for power to run air conditioners.  The Great Barrier Reef started to die.  Even now, in late autumn, it is still over 30 degrees C in daytime.  And I was thinking this afternoon, it'll cool down as the earth radiates its heat back into space.  And I realised that that's exactly the problem.  Thanks to the rise in CO2 in the atmosphere, the earth can't radiate its heat away.  Oh, we will get winter, and soon, I hope, but even winter is warmer than it used to be.  What will next summer be like?  And the one after?

But still you meet denialists.  Our governing party, misleadingly called Liberal,  is in hock to dotty rabid right denialists and people who are clearly in the pay of coal and oil companies.  In the USA, Trump and the venal, dishonest politicians who have ascended to Congress and the Senate and the Administration on his coattails, are doing the best they can to stop this otherwise peaceful revolution.  Despite record heat in February.  Despite an Arctic which is several degrees centigrade warmer than normal.  I don't, when I'm rational, believe that they can stop this revolution, because it is driven by technological advances and plunging costs.  But we have seen the depths to which they will stoop.  And even if they don't stop it, they can slow it.  We can't afford that.  We need to speed up the switch to renewables, to electric cars and electric transport generally, not slow it down, because we are perilously close to runaway positive feedback processes which could raise the earth's temperatures by a degree over the next two decades.

One doom-loop feedback has already started, in the Arctic.  Less sea ice means the seas are darker so they absorb more sunlight, which makes them warmer, which means there's less sea ice, and so on and so on.  The same processes are happening on land in the Arctic too.

But there are other feedbacks: drought in the Amazon is causing the rain forest to die, which in turn is reducing water vapour in the atmosphere, which leads to further droughts and more rain forest dying and burning.  This isn't just potentially disastrous for global weather, it also means that the Amazon rain forest, a huge carbon sink, is releasing its carbon into the atmosphere which will drive global temperatures higher.

Then there are methane clathrates, in the Arctic and on shallow continental shelves in high latitudes.  Methane clathrates are essentially methane frozen into water, forming a crystal.   The trouble is, though the methane released when clathrates melt eventually decays into carbon dioxide, until is does it is a far more potent greenhouse gas than carbon dioxide.  Over 20 years, it is 86 times as potent as CO2.  The melting of methane clathrates 55 million years ago is thought to have caused the PETM (Paleocene-Eocene Thermal Maximum) when global temperatures were 5 to 8 degrees C higher than they are today.  There were no ice sheets, because they melted.  If the Greenland and Antarctic ice sheets melt now, sea levels will rise 70 metres (230 feet).  Of course, it won't happen overnight, but the risk is, with all the positive feedback processes, that it happens much faster than we're hoping for, that the one metre rise forecast by 2100 turns into 3 metres.

Yet despite the risks, I still find the gullible (who believe the lies spread by the right-wing press, media and twitterverse), the venal (who know it's true but want to still make money while they can), the ignorant (too busy focusing on celebrities and soap operas) and the plain stupid (who think fighting culture wars with the Left is more important than saving the earth and our civilisation.) I find too many of them. Too many who say, well, the earth's always had a variable climate, so why worry.  Too many who spread lies, saying renewables are more expensive than fossil fuels.  Too many who accuse scientists of "cooking the books", when in fact it's the planet that's cooking.  Too many people who say "we can always go to Mars" (at $500,000 per person!) when they won't support politicians and activists who urge the switch to renewables, "because it will be too expensive".  Duh.

I started this blog to talk about politics and economics, but it became obvious to me that the greatest danger we face is global warming.  And I, and all the others out there who are also trying to raise the alarm and encourage action, are just lone voices, crying out in the darkness, while venal, dishonest and dishonourable cretins hold public office, determined to slow and reverse the "Leftist", "greenie"  revolution which would save the world from runaway global warming, megadeaths, and the consequent collapse of our civilisation.

So I despair.

But I will not give up the fight.  I'm going to keep up the struggle to inform my readers.  I'm going to keep on urging you to vote for politicians and political parties who do not flat out lie about climate change.  I'm going to continue to urge you to discuss it with your friends, to call out denialism when you find it, to push and press and nag, until the great logjam of public opinion breaks up and we act,  to save ourselves and our planet.

Atlas shrugged

Via Paul Krugman


From Wulff and Morgenthaler

Thursday, March 16, 2017

CSP gets dirt cheap


Solar Reserve, the people behind the Crescent Dunes concentrated solar power (CSP) plant in Nevada, have bid just US$63/MWh in the reverse auction with the Chilean government for their Copiapó plant in Chile.  Here's part of an interview between CleanTechnica's Susan Kraemer and Kevin Smith, CEO of Solar Reserve:

SK: You bid Crescent Dunes in Nevada at 13.5 cents, then Redstone in South Africa at 12 cents. Your bid in Chile was 6.3 cents. How are you able to come down so low for solar that includes thermal storage so it can be dispatched any time — 24-hour solar for just 6.3 cents/kWh?  
KS: SolarReserve has made substantial advances in our technology that has increased efficiencies and brought down capital costs since our first project in Nevada.
But there are a number of other factors that influence power prices and the Chilean market appears to be ideally suited for solar thermal with storage. In addition to the best solar resource in the world, the country’s stable financial status along with US dollar denominated power contracts results in excellent financing and investment terms

SK: How do you ensure that you can deliver solar power around the clock? Does that require operating at something less than full capacity?  
KS: Our bulk storage capabilities utilizing molten salt give us tremendous flexibility, without having to consider the degradation issues associated with batteries or the replacement cost issues. 
We’re designing the projects in Chile for full capacity 24 hours a day. To do that we put in about 14 hours of storage. That will give us the full capacity of the project essentially 24 hours a day.

SK: Might you bid a Hybrid PV/CSP like Copiapó in Chile’s Next Round? 
KS: We permitted Copiapó for PV as well as CSP, but actually in the current situation, we’re not sure of the value of adding PV into the mix, because daytime power prices are low. We can take the PV out as we’re not required to include it. We could always come in later and add the PV in the future if it makes economic sense, but we think it has limited value in the Chilean sector right now: there has been an oversupply during the day because of all the PV. 
So in the last round we bid Copiapó purely as CSP with SolarReserve’s tower and molten salt storage technology. We had already made that decision that the PV wasn’t adding any value to the bid, so we did not include the PV, and we bid that at $63/MWh. 

[Read more here]

That's cheap.  What this means is that CSP can deliver power 24/7 at a lower price than coal or gas, without any CO2 emissions. 

Obviously it's cheapest in desert regions close-ish to the equator, like northern Chile, and in the mid-latitudes it will be 20 to 40%  more expensive, because there's less sunshine.  At high latitudes, wind plus storage remains the most attractive option--but it is also true that countries like Denmark could still get their power from CSP plants in Spain via HVDC lines.

Solar Reserve is planning two more CSP plants in Chile, each with three towers, has offered to build six in South Australia, and is planning on building a ten-tower complex in China.

Tuesday, March 14, 2017

Policy vs statistics

My last post was about how 2017 might actually be hotter than 2016.  So let’s look at the chart again, only, this time with two trend lines drawn in.  I haven’t used statistical methods to fit the trend lines, I’ve just drawn them in by eye, doing what I would for share prices or stock market indices.  And we don’t really have enough data yet to draw a new trend for the last 4 or 5 years.  But some points are instructive.  First, this is the biggest breakout above the 50-year trend in 50 years. Second, after the last big El Nino in 1998, temperatures in the subsequent year fell sharply.  This time, they might not.  A statistician or climate scientist would be cautious about forecasting a change in trend based on 5 years of data.  They’d point out that we need 25 or 30 years to be sure of the trend.  And they’d be right.

But what happens if you are a politician, entrusted with the welfare of your fellow citizens and of your country?  Indeed, what if you are a citizen, with just your vote, and you're concerned about the welfare of your children and grandchildren?  Do you wait for certainty?  Temperatures have on average risen a bit less than 0.2 degrees C per decade since the 1970s.  So that is very likely to be the minimum trend increase over the next 20 years, unless we stop pumping CO2 into the atmosphere.  But what if in fact the trend has possibly doubled, to 0.4 degrees per decade?  This makes action far more urgent than was agreed at the Paris conference.

The scientists would, rightly, say we don’t have enough data to forecast with any certainty that the trend increase in global temperatures has risen.  But policymakers have to face a different calculus.  They have to assess risk and the probability of worse-case scenarios.

Back in the 80s and 90s, global temps hadn’t risen a lot, and the costs of renewables were far greater than the costs of business as usual (BAU).  Taking action against relatively uncertain risks was expensive, especially for poor countries.  Only the countries most concerned about environmental risks, like Denmark and Germany, actually made any serious moves to green their electricity system.  And we thank them for it, because they pushed us down the renewables learning curve, making renewables cheaper for the rest of us.

But what is the position now?  Well, the evidence of the last 50 years is unambiguous. Remember, the chart isn’t from those “leftists” and “greenies” at NASA, NOAA etc.  It’s from Berkeley Earth, a totally reconstructed series going back 200 years.  And then there’s some credible risk that the trend has accelerated, based on the data, probably driven by malign doom-loop feedbacks from the rapid disappearance of Arctic sea ice to the melting of methane clathrates in the Arctic.  Meanwhile instead of being much higher, the costs of renewables are now lower than the costs of fossil fuels.  Batteries are plunging in cost too, and there are a whole plethora of new storage technologies popping up everywhere.

Whereas the costs of acting in the 80s and 90s relative to the certainty of rising temps was high, now it is extremely low.  The risk/cost equation has blown out dramatically.  Scientists might urge caution, but policy makers have to act now.

We can’t wait til 2050 to reach zero emissions.  We now need to try and get there in 15 or 20 years,  not in 35 years.  How?

  • Aim to increase the renewables percentage in generation by 5% a year
  • A carbon tax, starting low but increasing inexorably year by year, or a cap-and-trade program with the cap declining by 5% a year
  • Taxes on imports from countries which do not have similar initiatives
  • Subsidies for EVs funded by raising taxes on petrol and diesel
  • Encouraging behind-the-meter batteries for homes and businesses
  • An end to forest clearing and burning in the Amazon, Indonesia, etc.

Cost declines are already moving us towards a 100% green energy system.  My fear is that we'll be too slow; that vested interests will try to stop or slow that move.  We put a man on the moon in just 10 years -- an extraordinary technical and technological achievement.  We can de-carbonise our economies rapidly too, if we wanted to.  Do we want to?  Will the recent rises prompt a rethink?   What do you think, readers?