What source of energy would predominate in a genuinely Free Market?

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Physiocrat
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What source of energy would predominate in a genuinely Free Market?

Post by Physiocrat » Thu May 10, 2018 1:55 pm

This is something I have often considered. My instinct for electricity generation would be coal based on how cheap and dense a source of energy it is. Nuclear Power stations seem to require far more start up costs (always, I think subsidised by the public purse) and are more dangerous, but I think the danger they pose is overblown in some quarters.

I'd also expect oil to be the main fuel for transport at least until batteries become half decent and even then, without decent infrastructure you won't have charging points.

Thoughts anyone?
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Merlin
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Re: What source of energy would predominate in a genuinely Free Market?

Post by Merlin » Thu May 10, 2018 11:24 pm

There’s at least four factors that could come into play: cost per KWH, fixed (upfront) costs, externalities and susceptibility to the lack of extended transmission networks. We have a rather fair understanding of the interplay of the first two factors (you build the cheapest per KWH plant you can afford), but we really do not know how a free society would handle the last two.

If my idea of a free society turns out to be anywhere near realistic enough, and urban agglomerations end up being owned by massive corporations, with most of the less densely settled land being owned by individuals, the network would probably end up being contained within a single city. A very convenient setup for our needs, since it would allow the single owner to determine if the risk of nuclear or the pollution of coal would be worth it.

So, those cities would probably tap concentrated solar and hydro (both to produce and store energy) to the largest extend allowed by nature, and then proceed to split the difference between coal and nuclear, with the later coming to predominate as time goes by and coal becomes expensive and/or some sort of externality such as smog is legally associated with it. Concentrated solar, coal and nuclear also have the added benefit of producing much more heat than energy, so piping hot water into homes would be feasible and cheaper than having individual homes heat their own water.

Add the odd gas turbine to equalize the load and that would be it, I guess. I doubt PV solar or home batteries would gain much traction absent government intervention. Those living in less dense areas would probably end up buying their own power plant since that would be cheaper then buying power from some external producer (here both PV solar and batteries could make sense). Major private companies with massive power needs (ex. foundries) would also probably opt to buy their own setup.

I too do not really see any credible alternative to oil for motor transport, so that would probably go on for decades.

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Re: What source of energy would predominate in a genuinely Free Market?

Post by Clayton » Fri May 11, 2018 5:41 am

Physiocrat wrote:
Thu May 10, 2018 1:55 pm
This is something I have often considered. My instinct for electricity generation would be coal based on how cheap and dense a source of energy it is. Nuclear Power stations seem to require far more start up costs (always, I think subsidised by the public purse) and are more dangerous, but I think the danger they pose is overblown in some quarters.

I'd also expect oil to be the main fuel for transport at least until batteries become half decent and even then, without decent infrastructure you won't have charging points.

Thoughts anyone?
I mean, the tech we have is the tech we have. I think that the oil market is, in many respects, very close to being a free market not because governments do not meddle in it, but because it is such a large-cap industry that the big players have deep enough pockets to push back against governments... it's much closer to being a fair fight than for most other industries.

I would speculate that the electric grid would probably be two-way so that there could be much more competition in electricity production. I also speculate that there would be a larger diversity of energy sources available for "at-scale" use - everything from rechargeable batteries to compressed natural gas or propane. This would allow greater "cross-energy-source" competition. I also think that there would be much more price-sensitivity in consumer devices (cars, household appliances, electronics) to be energy-efficient.

The dangers - and thus the costs - of nuclear power are overblown precisely because they are invariably some kind of public works project. Nuclear power has gotten a black eye from Fukushima but it has the potential to be a massive, cost-effective source of energy... freeing the market in this domain (by reducing the absurd regulations created by the fear of nuclear weapons) would make nuclear energy much more widely available. Also, I think Tesla was on to something with the whole idea of harvesting electromagnetic energy from the planetary environment.

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Re: What source of energy would predominate in a genuinely Free Market?

Post by Neodoxy » Fri May 11, 2018 9:00 am

To my knowledge there's no reason not to think that, for the time being, coal, natural gas, and oil would predominate. If any of the renewable methods were economically viable then governments would have pushed us onto them by now. Nuclear is the only interesting case. I think that nuclear is economically viable ENTIRELY depending upon what you think the insurance situation of these in a free market would be. I did a report on nuclear power, and at least in the United States a major thing that dragged down the profitability of nuclear was that they had to pay into a big insurance pool. I could see the premiums they would need to pay being higher or lower in a free market, as theoretically they pose a big threat to all nearby areas, and as it stands they are not profitable.

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Re: What source of energy would predominate in a genuinely Free Market?

Post by Jon Irenicus » Fri May 11, 2018 10:52 am

Pebblebed reactors are worth looking into.
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Re: What source of energy would predominate in a genuinely Free Market?

Post by Physiocrat » Wed May 16, 2018 12:03 pm

Neodoxy wrote:
Fri May 11, 2018 9:00 am
To my knowledge there's no reason not to think that, for the time being, coal, natural gas, and oil would predominate. If any of the renewable methods were economically viable then governments would have pushed us onto them by now. Nuclear is the only interesting case. I think that nuclear is economically viable ENTIRELY depending upon what you think the insurance situation of these in a free market would be. I did a report on nuclear power, and at least in the United States a major thing that dragged down the profitability of nuclear was that they had to pay into a big insurance pool. I could see the premiums they would need to pay being higher or lower in a free market, as theoretically they pose a big threat to all nearby areas, and as it stands they are not profitable.
The insurance angle is very important with respect to nuclear. Also though, aren't the power stations themselves significantly more expensive to build than say for coal?
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Re: What source of energy would predominate in a genuinely Free Market?

Post by Tom Rogers » Fri May 18, 2018 5:54 pm

At the moment, most consumers of energy (domestic and business/commercial) tend not to care what the energy source is, they are only interested in price. Reliability of different energy sources is also not a factor for electricity, as there is a common infrastructure. The complication is gas, which competes with electricity in the domestic market to a significant extent and has its own infrastructure. There is relatively little penetration into the UK domestic market by scaled non-renewables, e.g. solar panels on the roof. In effect, the supply side of energy is mostly an artificial market between service providers who do not actually source or supply the energy. But it's important to note that the regulation that exists now takes the form of corporate, service and price regulation - these are important in manipulating the market for various purposes.

I would define a "genuinely free market" as one that is not only without government intervention and that has, I assume, very minimal regulation, but also a situation where all energy sources are privately-owned. In that environment, prices could go up considerably if there are no major regulatory inhibitors to this, and if companies seek to profiteer on behalf of their shareholders and assuming that the relevant private owners and providers can simply withdraw services on simple breach of contract. A large minority of people may then turn to scaled energy and it may be that the real growth in activity in a genuinely free market will take the form of competition between manufacturers, suppliers and installers of domestic energy generation products: everything from natural gas tanks to solar panels.

I will assume also that in this free market environment there will be no bar on corporate mergers or the creation of monopolies. If so, you would probably see a lot of cross-integration and vertical integration in the production chain, and it would boil down to which source of energy is best for the bottom-line: I think that would most probably be fossil fuel sources like coal, gas and oil, which have existing infrastructures and can be scaled fairly easily. The basic problem with renewables at the 'industrial' and wholesale level is that they are capital intensive and, as far as I can tell, virtually impossible to scale due to their physical nature. You need a certain number of wind turbines, for instance, but you can't easily and readily reduce or expand that deployment so it's not responsive to markets. Similarly with specialised technologies such as electric cars: at the moment, they would require a large dedicated civil infrastructure that would also be dependent on non-renewables.

I'm ruling out nuclear as a major factor in a free market situation on the basis that, under present technology, it's very capital-intensive, both at the generation end and in the market for disposal, and reliant on government aid and high-level regulation to assure market penetration over very long contract spans (20 to 25 years is typical), thus civil nuclear is inimical to unencumbered free enterprise. Probably in a hypothetical free market scenario, governments and energy companies would work together to experiment with nuclear in an effort to develop something more viable. It's analogous to a hypothetical private-owned space exploration market: the capital required would restrict the number of players and viability of projects considerably, limiting activity to satellites and probes, but you'd probably have private-public co-operation on the experimental side looking at how larger projects could be made to work commercially. Weren't the major medieval explorers of the Atlantic - Cabot, Columbus, etc. - also mostly chartered and sponsored by royal treasuries? Without the taxpayer to do that crucial heavy lifting, you have a more interesting situation where, I suppose, people would have to enjoin and collaborate to make major progress.

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