#137: Malice in Wonderland

A SHARP LESSON IN ENERGY ECONOMICS

“Show me a man who can join in a laugh at his own expense,” says a character in Nicolas Blake’s 1940 novel Malice in Wonderland “and [you] show me one of nature’s gentlemen”. Blake’s writing often hits the spot – not surprisingly, perhaps, since ‘Nicholas Blake’ was the pseudonym of poet laureate Cecil Day-Lewis – and I hope that my experiences over the last week or so pass this particular test. Laughing, as the saying goes, was the only alternative to tears.

Though few articles here are composed in the first person, what follows necessarily runs from the personal to the general. Whilst the “wonderland” of the title refers to the island where I live, the “malice” has no human agency, referring instead to the workings of the weather, and of inanimate objects.

This story begins with an inanimate object – recognition that my computer, which gets extremely heavy use, was in the process of falling to bits. Its replacement having arrived, I set aside last Saturday for installation, only to discover that the new machine was faulty, and required return and replacement.

So far, so bad, but much worse was to come. On Sunday, the temperature here dropped from a balmy 25°C to an unseasonal 11°, accompanied both by torrential rain and by winds which, over the coming week, were seldom to fall below gale force. Midway through that morning, a tornado took out a key part of the electricity distribution system, leaving most of the island without power. By Tuesday, the authorities had installed generators in some of the main conurbations, though even this was hardly trouble-free, with several of the generators reportedly bursting into flames, apparently under stress of excessive demand.

Obviously enough, this event denied me, not just light and power, but music, hot water, computing and hobbies. Things didn’t end there, though. Water supplies failed through lack of pumping, and even the front gates remained shut until I could figure out how to open them manually. First task after that was to find out which, if any, shops (one) and restaurants (none) had backup power supplies. The presence of mind of one bar-owner enabled locals to revel in Barcelona’s 5-1 annihilation of Real Madrid, though this generator didn’t extend to hot drinks, let alone meals. Fuel in cars had to be used sparingly, because lack of power shut down the filling stations.

Put simply, normal life ground to an almost complete halt. Almost all business and official premises remained shut, depriving the public of postal, banking and most other services. Loss of internet connection deprived me of contact with the outside world. I didn’t miss television (since I never watch it), but I did miss my music, my DVDs, my books, and working on my latest project (a 1/72^nd exact scale model of a Type 12 frigate). All that one could really do was to eat snacks, fight an impending cold with soluble vitamin C, sit around in the cold darkness – and think.

Since I’ve contended for very many years that the economy is an energy system with an artificial financial adjunct, I should have been less surprised than most at the near cessation of all normal activity by the simple interruption to the supply of electricity. Even so, the lesson taught by this event was the sheer totality, and the rapidity, too, with which the absence of energy brings normal life to a halt.

Let’s, then, summarise the predicament of the population of the island during the power hiatus. The immediate effects were loss of domestic electricity supply (and, with it, light, power, cooking facilities, refrigeration, water supply and communications). In the business sector, activities in almost all categories ceased, most obviously including financial services, retailing, distribution and the supply of energy. Most aspects of government, including administration, revenue raising, defence, policing, health care and social services, seem to have kept going, but only by courtesy of generators.

The nearest generator to me had to be refuelled at intervals of between five and six hours. This particular generator was kept supplied with fuel by tankers small enough to negotiate some very narrow streets, and generators sited in broader thoroughfares might have been serviced by larger vehicles, extending the resupply interval somewhat. Presumably, the generating capacity itself was supplied, by sea, either from the mainland or from a much larger neighbouring island, neither of which was affected by the outage.

Ultimately, three factors made the situation survivable. First, the community here has particularly strong social cohesion. Second, the loss of power was always known to be temporary, and unlikely to extend for as much as a week. Third, and critically, outside help was available, because the power loss was strictly localised to most of one small island.

It doesn’t take much imagination, though, to picture what might have ensued if none of these favourable conditions had prevailed. Even with outside support, the duration over which anything approximating to normality would prove sustainable is strictly limited – and this brief and incomplete sustenance of normality could not have happened had the rest of the country been affected simultaneously. It takes little imagination, either, to envisage the erosion of social cohesion had neither limited duration nor nearby support characterised the outage.

Let’s be quite clear about this. If energy supply is cut off, and is cut off in way that is of unknowable duration, and for which there is no outside help, economic and other normal life ceases to be possible.

Could money solve this problem? Well, if you will, imagine that, whilst unable to offer physical succour, Madrid or Barcelona had been able to supply the island with money – you might even picture airdrops of bank notes by the air force, or the delivery of millions of euros by naval auxiliaries. You will appreciate that this purely financial support would have had absolutely no positive effect on the situation. All that it might, conceivably, have achieved would have been to trigger massive inflation, with more money chasing an extremely small supply of goods and services.

Let’s be clear that weather-related outages like the one experienced here are not going to deprive even a sizeable national economy of energy, and neither are we, in any meaningful sense, going to “run out of” energy. There are, though, two very real threats which we should consider.

The first of these is a simple inability to purchase energy, even if global supplies remain generally accessible. This is what happens to an economy if the value of its currency collapses. Picture, if you will, a country relying on imported energy (or, for that matter, imported food, itself an energy product), and imagine that the country’s currency experiences a sudden 75% fall in its international value. What this means is that the local cost of energy has quadrupled. A variation on this theme is a situation in which the country’s currency ceases to be acceptable to foreign suppliers, who perhaps see reason to question its viability. Both scenarios are distinctly possible, given the sheer scale of credit and monetary risk adopted, as a sequential matter of policy, over the period since the late 1990s.

The second (and likelier) scenario involves an erosion of surplus energy, a situation which arises when, within any given quantity of accessible energy, the amount available for all purposes other than energy supply itself becomes squeezed by a rise in ECoE (the energy cost of energy). We don’t have to imagine this scenario, because it’s already happening – according to SEEDS, world ECoE has now risen to the point where global average prosperity per person is in decline.

Thus far, we’ve done a pretty good job of collective and official denial over this reality. We have poured huge amounts of debt – and, latterly, of cheap money as well – into the system in order to retain a misleading semblance of economic normality. We’ve told ourselves, along the lines of a bedtime story for frightened children, that renewables will rescue us from the economic and environmental follies of burning up fossil fuels at the maximum rate possible, heedless of the future.

In short, what happened here this week may, in itself, have been a freak occurrence – but it is no less unreal than the stories we tell ourselves about infinite growth on a finite planet.