Reuters has an interesting story about a project to put solar panels in North Africa, with power lines to transmit this electric to Europe.  The story states:

The European Union is backing projects to turn the plentiful sunlight in the Sahara desert into electricity for power-hungry Europe, a scheme it hopes will help meet its target of deriving 20 percent of its energy from renewable sources in 2020.

“I think some models starting in the next 5 years will bring some hundreds of megawatts to the European market,” Oettinger told Reuters after a meeting with energy ministers from Algeria, Morocco and Tunisia.

He said those initial volumes would come from small pilot projects, but the amount of electricity would go up into the thousands of megawatts as projects including the 400 billion euro ($495 billion) Desertec solar scheme come on stream.

$400 Billion euro sounds like a lot of money.  But perhaps it isn’t, considering they are going to produce a lot of power.  Let’s do some math:

Europe today gets 4.2% of it’s electricity from wind, which according to the EWEA produce 142 TWh (terawatt-hours) of electricity in 2008.  Dividing by 8760 hours in a year, this is 16.21 GW (gigawatts).  Dividing by 4.2% gives a total power demand in Europe of 386 GW.

Let’s generously assume that the Sahara Solar projects will provide ALL of the EU’s 20% target for electricity generation.  That would mean the Sahara solar project would need to produce 77 GW of electricity.  At the quoted cost, this works out to 6412 USD / kW of flowing power.  Of course, solar has a low (<50%) onstream factor due to night, so the cost per installed kW is lower, perhaps around $3000/kW.   But it is the flowing kW that matters.

How does this compare to other power generation options?

Well, gas-fired combined cycle plants cost between $1300 and $1500 USD/kW.

Coal-fired plants cost between $1200 and $2000 USD/kW, depending on whether it is a traditional thermal plant or IGCC type facility.

Nuclear projects cost between $3000 – 5000 USD/kW, depending on jurisdiction and local labour costs.

So this solar plan is expensive.  And doesn’t provide power at night.

No wonder the company behind it wants subsidies:

The Desertec consortium includes major firms such as Siemens, RWE and Deutsche Bank. They are expected to seek public money for the project.

So Michael Ignatieff has decided to give up on Alberta when it comes to elections. He is taking a stand against oil tankers of the BC coast, proposing a ban on such tankers.    The Liberals clarified:

Ms. Murray indicated the Liberals are against large supertankers and not the many other ships that sail B.C. waters. The Liberals don’t oppose the smaller tankers carrying a light oil called condensate that already ply the choppy waters of Dixon Entrance, Hecate Strait and Queen Charlotte Sound around Haida Gwaii.

The Liberals also did not take a stand on the oil tankers that sail past downtown Vancouver and Stanley Park taking crude from a facility in Burnaby, a terminus of Kinder Morgan’s Trans Mountain pipeline from Alberta.

So they aren’t against all tankers.  Just additional tankers that would carry more export oil from Alberta from the proposed Gateway Pipeline terminal at Kitimat.  This pipeline is expected to provide an additional outlet for Alberta’s production, which may somewhat decouple Alberta prices from US demand by providing additional markets.  Isn’t it the Liberals that created the “Team Canada” missions to help Canadian businesses expand to markets other than the United States?

So, by deciding that exporting more of Alberta’s oil is bad, does Ignatieff expect to win any seats in Wild Rose Country?

Jim Flaherty, the Canadian federal finance minister, has posited in a letter to his Ontario counterpart, that perhaps the premiums that all Canadian workers (and their employers) pay should be increased to increase the amount of money Canadians are saving for retirement.

This is a very bad idea.

First, increasing payroll taxes is a known employment killer.  Employing people costs companies more, so they have an incentive to reduce hiring.

Second, the CPP is a backstop pension plan.  The amount of money I would ever recover from CPP is not really enough for anyone to live on – so no one should rely solely on it anyway.

Third, the CPP is a giant Ponzi scheme ( less now than it used to be).  The money I put in is not being invested for my future retirement.  Much of my contributions  will be used to pay the pensions of the boomers.  Work out the rate of return on maximum CPP contributions versus maximum benefit, considering 30 years of paying in and 30 years of withdrawls (assuming long life) – it’s terrible (like <3% terrible), because it’s a scam.

Fourth, while the advent of the CPPIB is an improvement over the  true Ponzi scheme it was until the early 2000′s, I do not trust the governments of the future to keep their hands off it.  As the CPPIB fund becomes a massive sovereign wealth fund, many politicians will want to use it’s financial power to invest in ill-advised pet projects.

So, Mr. Flaherty – don’t do it.  Doubling the allowable RRSP contribution limits would be better.

Yet another example of interprovincial trade restrictions that exist for no reason other than to prevent competition and create work for government bureaucrats.

Contemporary Security Canada, which also provided private security for the Vancouver Olympic Games, was selected by the RCMP to provide approximately 1,100 private security guards to screen pedestrians throughout the summits in Huntsville and Toronto.

But security guards and the companies they work for are required by provincial law to be licensed, and the Ministry of Community Safety and Correctional Services said Contemporary Security Canada is not currently approved.

Wait - a company that can do work in BC (and by extension Alberta and Saskatchewan via TILMA, I assume) needs to do extra paperwork and wait for the Ontario government to approve them?  Why doesn’t Ontario simply accept that BC is a reasonably equivalent jurisdiction?

Ms. Blondeau said the ministry is working to do background checks on the company and the security guards they have hired for the high-profile international event. But she said they found out about the issue only after the company was hired.

“My understanding is that the RCMP has a long-standing relationship with this company,” she said. “So they secured them and we found out about it after the fact. It’s an inconvenience.”

Wait - so the RCMP uses this firm a lot (and thus trusts them), but now we need the provincial government to approve them too?  Since the RCMP is spending the money here, on behalf of the federal government, why is it necessary to have another level of government involved in the transaction?

The company must pay a fee and go through a rigorous process to become a licensed agency, and Ms. Blondeau said they will be able to work at the summits only if they are approved.

“If they are an agency that is approved to do business in Ontario, then they can proceed,” she said.

And bureaucracy stifles business some more…

A report in the Economist shows that Canada is not doing enough to encourage entrepreneurship and innovation:

Why does Canada not have lots of “new firms” patenting new ideas?  Norway and the Netherlands are both smaller than Canada, so I would hope Canada was at least in the same ballpark as Germany and France…

Now, I disagree with the Economist in their proposal to impose Pigouvian taxes as a means to encourage innovation – this is little different than the pandering to “pet” technologies they hope to avoid.

Lower taxes, more flexible labour markets and less government regulation of markets and products would be a very good first step towards encouraging innovation.

I was going to write a piece refuting a piece in the National Post today (reprinted from the New Republic), but tonight when I finally had the time I discover that the Post’s own Peter Foster beat me to it.

One other point I’d like to make that Foster didn’t cover had to do with Judis’ subheadline:

Try as we might, we’ll never be able to recreate the Golden Age of capitalism that lasted from 1945 to 1970

Umm.  Small problem – how could the period from 1945 through 1970 be considered the golden age of capitalism?  In Europe, the UK and Canada, socialist leanings became government policy and governments in these nations set themselves up for the doom that came in the 1970s and later (and continue today in Europe…)  This so-called golden age only really existed in America, and even there it was distorted by historical luck.  In 1945, the United States was the only significant industrial producer on Earth.  Everyone else had had their industrial capabilities destroyed by war.  Germany, France, the UK, Japan, China, Russia were basket cases of post-war reconstruction.

If those nations wanted to buy something, they bought it from America.  They had no real choice.  As the UK, Germany and Japan rebuilt, they began to compete with America, but at no time prior to 1970 did they have significant economic power.

Also, the post-war period was one of government intervention in the economy through high tariffs left over from the 1930s, and artificially fixed exchange rates care of Bretton Woods.

Only to an American could the 1945-1970 period be considered a golden age – and even for America it turned out to be bad – GM, Ford and Chrysler didn’t have to learn to be efficient.  And when the Volkwagens and Toyotas of the world really arrived in the 1970s and 1980s, they weren’t ready.  And many other American firms couldn’t compete using American workers, because they had had it too easy in the post-war period.

Some Golden Age…

In the WSJ the recent daily trend in the stock, bond and currency markets is taken as evidence that confidence in the days-old European bailout and austerity plans is slipping.

First, a few days is hardly enough evidence. But second- what do they propose.

The real problem is that leaders in Europe need to admit to their citizens that the socialist welfare states they have created are not sustainable and must be dismantled. Not adjusted, but dismantled. Europe needs to get back to work and create wealth. They need lower taxes and balanced budgets. Which means no more subsidies, less government and less legally mandated vacation.

Margaret Wente, in the Globe and Mail this week, writes that we live in an era of big “blow ups” that cannot be stopped.

The problem, as I see it, is not that Wente’s smartest people in the world have no idea how to stop it.  It is a combination of:

• People who think they are the smartest, but are not, trying to control things they don’t understand or refuse to understand the law of unintended consequences…
• The smartest people being sidelined because they make the “not smartest people” fearful
• The smartest people being prevented from do what would solve the problems because of bureaucratic restrictions, fear of retribution, or fear of being second-guessed.

On the subject of economics, the problems of the last few years are not failures of free market capitalism.  They are failures of government regulation to foresee how the free market would react to such regulation.   Reducing interest rates to sub 5% levels for nearly 10 years, coupled with government policies to restrict housing development in many areas, coupled with government policies created to increase home ownership did two things – it drove up demand and reduced supply.  Prices rose – as should be expected under a free market.  The problem became that people, and businesses, believed that prices would continue to rise, and therefore boring at very low interest rates against such assets was a good idea.  And for those individuals, this was a perfectly rational decision – except that the party couldn’t continue, because there was too much debt piling up and interest rates can’t stay at zero forever.

If interest rates were set in the free market (solely), they would have risen significantly as the level of debt in society increased – because lenders would fear defaults and want a larger return for the larger risks they were taking.  But with the government setting interest rates and backstopping banks lending into the market, the free market was solely distorted.

On the subject of oil drilling and the safety and environmental issues, it is only in times like this that the engineers are tasked with the exciting job of “fix it now and cost is no object”.  The problem is that it should have been avoided.  But how many businesses will keep working with a piece of machinery that is dangerous because stopping to wait to replace it will have significant negative financial impacts.  And what if the person who should make that decision, to shut down the plant to replace the equipment, has their job on the line based on the financials?  In some cases, those individuals will take the risk on the unsafe equipment because the risk to themselves (their livelihood) is greater than the potential consequences of the failing equipment.   As many incidents have shown, both in industry safety and the financial markets, the human ability to quantify risks is skewed.  Very unlikely events with very bad consequences are often underestimated because of their low probabilities – if you ever hear someone say “but that will never happen”, they have done exactly that.  The history of industrial accidents is filled with such events.  The financial crisis and the Deepwater Horizon incident follow this pattern.

Sometimes, mathematically modeling can help – as it does in the case of real insurance in large markets.  It makes senses to buy insurance for some events because it is cheaper for all of us to pool the risk.  This is even the logic of the hedge funds that try to “hedge” out risk.  But if the risks are underestimated (or misunderstood), when they happen all hell can break loose.

But sometimes, you just need to rely on the smart people, be it the engineers, financial wizards, scientists – to be allowed to make a call and the rest of us have to accept they won’t always be right – but we might be better of than demanding they always be right and therefore are too frightened to speak out or act.

Yesterday, there was a report in the Winnipeg Free Press, quoting the Minister of State for Agriculture, Jean-Pierre Blackburn:

“There is a need for new markets for the food sector like any other sector,” he told The Canadian Press. “But at the same time we know some specific aspects have to be protected.”

He said supply management allowed dairy and poultry industries to remain among the most profitable and stable in Canada.

“Here in Canada, supply management works,” said the minister.

“If we open our borders there will be huge difficulties for these sectors. There would need to be changes for the way we do things. And we’re functioning very well in Canada.”

“It’s part of the Conservative government’s tradition, to be close to the farmers,” he said.

Coudl the good Minister please tell me how protecting Canadian consumers from lower prices is good?

Could the good minister please explain why protecting our farmers from competition and preventing them from competing on the world market is good?  Does he not know that when Australia and New Zealand ditched their supply management system, they became some of the largest exporters of these products?

Supply management doesn’t work for Canadians, unless you are a farmer already in the system.  And that seems like a small group of people benefiting at the expense of the rest of us.

A good post on Authenticity Hoax regarding the “local food” movement:

For all the revived fascination with a “local” economy, you don’t hear a lot of people pining for the return of the local abbatoir…

(From Foreign Policy): Influential food writers, advocates, and celebrity restaurant owners are repeating the mantra that “sustainable food” in the future must be organic, local, and slow. But guess what: Rural Africa already has such a system, and it doesn’t work. Few smallholder farmers in Africa use any synthetic chemicals, so their food is de facto organic. High transportation costs force them to purchase and sell almost all of their food locally. And food preparation is painfully slow. The result is nothing to celebrate: average income levels of only $1 a day and a one-in-three chance of being malnourished.