Daniel Kahneman has a simple explanation why we don’t think things through: laziness. It’s no work to rely on the sloppy, but fast and efficient, Hare mental system, using short cuts and stereotypes to get a response that is, under the current US President, good enough for government work. Rigorous thought is hard.
Karl Popper offered a short cut through the hard part that is still rigorous: falsification of hypotheses. One false prediction and you’re out. A nice idea, but it rarely works. You can save almost any hypothesis with tweaks, including Ptolemaic astronomy. So it’s back to comparing the best shots of the competing hypotheses, hard work again.
Just occasionally, life presents us with a simple Popperian test. Here is one I spotted, on the recondite but important subject of Indian coal burning. There are two entrants. Goliath is the IEA, a stuffy but reputed intergovernmental policy and data shop in Paris. David is IEEFA, a small energy policy think tank in Cleveland.
IEA: India’s coal consumption will more than double by 2040. (IEEFA pdf, page 1.) The source is presumably the IEA World Energy Outlook 2017, paywalled; it’s not in the free summary. See also this IEA FAQ:
The positive IEA outlook for coal demand through 2020 is based in part on growth in India and Southeast Asia that will more than offset structural declines in Europe and the United States.
The headline to the chart understates the predicted change: growth will be trivial after next year. This means that India’s overall carbon emissions may stabilise in less than a decade, assuming the electric transition goes as fast in transport as the government plans.
The Tortoise suggests that to choose between these predictions, you need to read both reports carefully, taking half a day at least. Being lazy, I preferred to catch up on short news items.
1. India reduced its coal generating capacity in Q3 of 2017:
Good news! But sadly it does not serve as a test. It’s only one quarter, after three increases. The general trend is expansion. This is the kind of shiny object that the Hare is attracted to, but it’s a cognitive snare.
2. But here’s another from CoalWire:
India’s state-owned power-trading company PTC India says that in the last two years power distribution companies have stopped signing 25-year thermal power purchase agreements and now opt for contracts of 10 years or less. Bloomberg New Energy Finance estimates that new coal plants in India designed to comply with the new emissions standards can’t compete with wind and solar prices achieved in the latest reverse auctions. (Bloomberg, Bloomberg New Energy Finance)
Now the IEA prediction implies that as a rule, and over a period, Indian coal power station projects in a competitive market will be able to secure the sales contracts on which their financing depends. Coal plants are built for a 40-year life. It’s a disaster for the promoters if they can only secure 10-year contracts. Is there any hope that prices will at least stay the same after ten years? No. The state distribution companies (discos), like the coal owners, are well aware that future prices of renewables will be lower than today’s, which are already lower than the cost of coal power. A temporary crisis? PTC India, a neutral public agency, says the situation has held for two years. The new coal plants are facing systematic unviability.
This strikes me as a true Popperian falsification. The IEA coal forecast for India must be wrong.
Does this mean that IEEFA are right? Not necessarily in detail; but since their general point is not-IEA, that holds for the win.
The IEEFA scenario predicts that private coal generators should be in financial trouble. This is confirmed by the number of coal plants nominally under construction that have been suspended (see the Global Coal Plant Tracker database). Of the nominal 70 GW under construction, only 43.4 GW are actually proceeding. The rest are either already open or walking dead (IEEFA report, page 38):
Reports show well over 50 thermal power projects are stranded, partly built but in the main massively over budget and behind schedule, often with inferior equipment, outdated technology and/or no access to coal. The result is that the power sector is the second largest cause of bad debt in the Indian banking sector, representing an estimated 12% of the US$150bn total..
It’s not at all sure the survivors – their number may well shrink further – will make any money (ibid., page 11):
This [planned] expansion in renewables capacity will mean no new coal-fired capacity will be required until at least 2027. Further, the 50 GW of coal power currently under construction will put the entire sector at just 50-60% of capacity utilisation through 2027. Where these new coal-fired plants don’t replace retiring capacity they will essentially become stranded assets retained as little more than reserve capacity.
These claims are not clean Popperian wins. But they look sound enough to me.
Aside: The behaviour of the discos illustrates the rationality of democracy in action – the messy kludge of the real thing, not an idealised model. Coal plant owners like Adani and Tata are rich and can buy a lot of influence. But not enough to overcome the absolute need of Indian state politicians to keep farmers’ votes. The farmers demand cheap electricity to run their irrigation pumps (it doesn’t have to be reliable). So retail prices are held down and the perennially broke discos can’t afford to play nice with power suppliers, especially out-of-state coal ones. Some have even reneged on contracts with solar and wind farms, since prices have dropped since they were signed. These ruthless tactics, in the reasonably efficient and transparent Indian generation market, have pricked the Indian coal bubble at a fraction of the size of the gigantic Chinese one: ~40 GW against a potential ~300 GW. China has less of a market and no democracy at all.