Wednesday, April 15, 2015

Two Reversals


CNNMoney reacts to news that for one month, for the first time ever, U.S. consumers spent more in restaurants than at supermarkets. Their reaction is puzzling:

It's noteworthy that consumers are willing to indulge a little bit by going out to eat ... but it also suggests that the cold weather is being used too often as an excuse for weak overall spending. Wouldn't people be more likely to stay home if the frigid temperatures were really that bad?

Of course, obviously, people forced to stay home because of weather are not buying food anywhere, but are eating whatever they have at home. And if the weather improves and they can just barely get out? Then there are, on average, about ten restaurants closer than the nearest grocery. If snow and ice make the roads too dangerous for driving, would you rather walk four blocks to the nearest restaurant or thirty blocks to the nearest supermarket?

Another point to consider when looking at this comparison is the price disparity between groceries and restaurant entrees. If people are spending nearly equal amounts at restaurants and groceries, that still means they are getting four times as much food at groceries than at restaurants.


In the energy sector, Bloomberg notes, “Fossil Fuels Just Lost the Race Against Renewables.” The subtitle, “This is the beginning of the end,” might be a bit of an exaggeration, but the essential point is sound: fossil fuels are now legacy technology in the energy business.

The shift occurred in 2013, when the world added 143 gigawatts of renewable electricity capacity, compared with 141 gigawatts in new plants that burn fossil fuels, according to an analysis presented Tuesday at the Bloomberg New Energy Finance annual summit in New York. The shift will continue to accelerate, and by 2030 more than four times as much renewable capacity will be added.

The Bloomberg analysis exaggerates the potential for nuclear power, an industry already facing the limits of available uranium. Still, solar alone could eclipse fossil fuels in incremental generating capacity around five years from now.

The shift in energy generation has more to do with the declining cost of newer technologies than with the various problems of fossil fuels:

The price of wind and solar power continues to plummet, and is now on par or cheaper than grid electricity in many areas of the world.

It is easy to look at the installation numbers and think that this transition is well on its way. In fact, new energy installations each year are small compared to already installed capacity, so the transition is not so sudden as you might imagine. It could take a century or two if you extrapolate current trends. The rate of the last five years is not nearly fast enough to ultimately meet the 2-degrees-Celsius guidelines for avoiding the most expensive consequences of carbon-based global warming. Still, it is fast enough to conclude that in a commercial sense, fossil fuels are losing the race and will only decline in importance from here.