What caught my eye this week.
Afternoon everyone, how are you finding the heatwave?
Portent of doom? Chance for a glass of vino in the garden at 8pm with your feet up pretending you’re in the Med?
Maybe a bit of both?
Actually, don’t answer. The usual suspects (or at least their social media bots) have moved on from blaming the EU and Covid denial to calling climate change a hoax. I’d rather they did so elsewhere.
At least shares have been recovering nicely.
The market seems to think it has sniffed out inflation rolling over, and in that environment future earnings become more valuable again.
I expected this – alas six months and one invasion ago – so I’m predisposed to agree. But when you look at the energy bills forecast for next year it’s going to take some believing. And another shock (or maybe yet a new variant in the pandemic) would surely set us back again.
Still as the graph below shows, it’s not unprecedented that a disinterested pound-cost averaging passive investor could get to December, do their annual check-in, and assume 2022 was a nothing happening year.
The rewards of passive investing stretch far further than saving a few quid on fees, right?
Have a balmy weekend.
From Monevator
Bear market recovery: how long does it really take? – Monevator
What happens to your credit score when you apply for a credit card – Monevator
From the archive-ator: wealth preservation strategies of the rich – Monevator
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1
Drought declared in several parts of England – Sky News
UK economy shrinks as stagflation looms… – Yahoo Finance
…so what would a recession mean for your money? – Which
House prices still rising despite falling demand, says RICS… – Sky News
…with London prime property near top of global league for future gains – ThisIsMoney
‘Crying CEO’ criticised for tearful LinkedIn layoffs doubles down – Independent
(Click to enlarge)
A [US] 60/40 was positive for the rest of the year after 9/10 worst first-halves – via Meb Faber
Energy bills mini-special
UK energy bills ‘set to cost two months wages’, ministers warned – Guardian
Bills will top £5,000 next year, says energy consultancy – Yahoo Finance
A quarter of UK hospitality outfits may close due to high energy bills – ThisIsMoney
What is Don’t Pay UK and will it work? – ThisIsMoney
Products and services
Free tool that guesstimates whether it’s worth paying up to remortgage early [Tool] – Nous
Delivery text scammers that go on to pose as your bank – Which
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Freetrade introduces new ‘trading breaks’ feature that prevents buying for 24 hours – Freetrade
Packet fresh US ETF meant to capture overnight anomaly already flunking – Advisor Perspectives
Homes for sale with price drops, in pictures – Guardian
Comment and opinion
What do investors believe they can do but can’t? – Behavioural Investment
Investors need some cosmic insignificance therapy – A Teachable Moment
Six key issues for expats returning to the UK [Search result] – FT
Should you die with zero? – Of Dollars and Data
Looking for light at the end of a very dark tunnel – David Smith
Inflation debates: YoY vs MoM – Pragmatic Capitalism
What’s the bull case? – The Irrelevant Investor
Five heavy-duty finance and investing books for your holiday reading – Humble Dollar
Debt denominator blindness – A Wealth of Common Sense
Treats and rewards – The Escape Artist
Chasing the fad – The Best Interest
Wade Pfau on the risks of retirement today [US but relevant, podcast] – Morningstar
Crypt o’ crypto
The economic limits of Bitcoin [PDF] – SSRN Paper [h/t Abnormal Returns]
Who buys cryptocurrency? [Trigger warning: it ain’t pretty] – TEBI
What NFTs can learn from art and luxury – Uncharted Territories
Naughty corner: Active antics
Selling Telecom Plus after recent share price gains – UK Dividend Stocks
How to own a fraction of a Warhol [Search result] – FT
Value spreads have gone back to tech bubble highs [Graph] – AQR
Kindle book bargains
The Ride of a Lifetime by [long-time Disney CEO] Bob Iger – £0.99 on Kindle
Anthro-Vision: How Anthropology Can Explain Business and Life by Gillian Tett – £0.99 on Kindle
Money: The True Story of a Made-Up Thing by Jacob Goldstein – £1.19 on Kindle
Simple Savings Hacks for a Happy Life by Holly Smith – £0.99 on Kindle
Environmental factors
Britain’s notoriously wet and cold climate is changing, and you won’t like it – The Conversation
Rainwater globally now considered too toxic for consumption, study finds – Vice
You can’t reverse the ESG trend anymore – Joachim Klement
Off our beat
Rare skills – Morgan Housel
Siestas: the pleasurable secret to dealing with extreme heat – Slate
Quiet quitting: why doing the bare minimum has gone global – Guardian
Beach vacationers are doing it wrong – The Atlantic
Remote work and the rise of the side startup – Vox
What is Elon Musk? – New York Mag
Brexit stage left: British band tells of farcical barriers encountered on EU tour – Guardian
Stop ghosting and start saying no – HBR
Mentor – Indeedably
Humans have always been wrong about humans [A few weeks old] – Wired
And finally…
“The big picture, on proper examination, is actually a vast mosaic of microscope scenarios, all intense and urgent for those lonely millions who struggle to inhabit them.”
– Frederick Taylor, The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class
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The huge increase in gas and electricity bills plus petrol/diesel is a tragedy for many.
But just imagine if every household had have invested a thousand pounds into the inevitable choice of wind, solar and electricity storage 10 years ago alongside upgrading the poor insulation standard of British homes?
Imagine if the government had have decided to throw billions into producing green power instead of subsidies into consumption through direct money injection to householders?
Where would we be now?
The current government have been in charge for 12 years and have no solutions or vision for the future – it’s a total mess.
Makes me want to pack my bags and leave except I’m enjoying Scotland having some decent weather for once!
Thanks for highlighting the Vox “Side Startups” article, chief. Mulling over a recent idea that has potential and it always feels like being a tiny speck in a sea of whales. Which isn’t a reason not to do it, but there’s an urge to get out of the amoeba stage asap and see if the idea has legs, without over-investing in effort or time. Take too long and the world will have changed.
@Gentleman, while the current govt is full of idiots, how long can the public live in denial about climate change and fossil fuels?
It’s a good wake up call and if this doesn’t force people to realise the benefits of renewables, I don’t know what will.
Govts should be focussing on smoothening the impact of external shocks, but not absorb them completely and pamper the public. Otherwise it’ll lead to imbalances elsewhere and bigger shocks.
@BBB i hope it means more and more of the general public start caring and then vote accordingly. While I dont want to get too political on a financial blog (for the record, I flit between Lib Dem and Green), it really grates me that state of play is now between two, frankly terrible Tory leadership candidates to lead us, especially Liz Truss (the absence of quality, knowledge or empathy in politicians across
the spectrum these days is astonishing). All they seem to do is pander to their membership and ignore all the big issues, which will, eventually, come back to bite them. (If not too late for the rest of us)
Truss’s proposed tax cuts literally don’t add up, let alone the stupidity of removing green levys. They either don’t get it or don’t care. I don’t think people on the breadline care about a penny off a tax bill, even in the event they are actually beyond the tax threshold in the first place, they would rather well funded public services and cheaper bills. Tax cuts are a fat lot of good to anyone if you can’t pay tax or the bills in the first place.
Gordon Brown was excellent on Matt Forde’s podcast this week, worth a listen. Ditto William Hague on Stewart and Campbell’s the Rest is Politics recently. Sensible and mature discussion about the real issues by real statesman, the likes of which I wish were in charge now, not throwing away crass lines about the so called culture wars or ignoring the biggest issue for all, climate change.
From an investment point of view, businesses that don’t take into account climate change will *have* to shift their focus, otherwise they won’t exist x years down the line. Will be really interesting seeing the evolution of the energy giants (not overlooking the short and mid term energy needs) and newer firms disrupting with innovation and new technologies. Some really interesting companies in Impax Environment’s investment trust, for example.
@gentleman I think it goes back to David ‘hug a husky’ Cameron’s decision to remove or drastically reduce the Feed in tariff for domestic solar in 2015. Don’t know the figures but im sure the take up would have dropped considerably, even with the costs of panels coming down and the panels efficiency improveming. I remember we completed on our house in November 2015 and frantically managed to get 13 panels installed before the tariff changed a few weeks later. Was more for environmental reasons rather than the investment, but nice when the payments come through. It’s also been a great inflation hedge (didn’t think about that either at the time more luck than judgement!)
The means are there, it just needs the willpower from the decision makers (and, er, their lobbyists)
I’ll take the other side of the market prognosis. I think employment is far too bullish for inflation to be fully tamed, so interest rates will keep rising and a ‘proper’ recession (i.e. with unemployment) will be necessary to fully correct that situation. I suspect the recent 0% month-on-month US inflation might prove to be an aberration.
So, if I was of that disposition, I’d be positioning myself bearishly. Though admittedly quite sustained, I think this might be a temporary Summer swoon.
I’m not of that disposition though, and my conviction that I’m better off tediously staying in the market whatever happens remains much higher than in anything I’ve written above. Still, it’s fun to speculate, and much cheaper to do so in words rather than £ and pence when it all goes wrong.
I must admit to being shocked at how badly the energy crisis is being managed. UK homes payings crazy amounts compared to EU ones with some businesses likely to close if the costs of energy are not reduced. Russian oil output down 3% with India and China filling their boots with cheap oil. Dont get me started on the lack of support to install solar on older homes, changing building regs so new properties have heat pumps and solar water heating and panels as standard. Plus wind turbines not being built in England due to planning, removal of green levies and liz truss banging on about solar panels on farms being a silly idea. No tidal investments, lack of gas storage and allowing raw sewage to be pumped into rivers at a frankly appalling rate. Its as if they are trying to do everything in their power to destroy the planet. If we had just done some frankly mildly sensible things a few years ago then these events would be so much easier to overcome. Its mismanagement and incompetence on a massive scale and yet we just blunder on in the same way hoping flag waving hides the mess.
@JDW – hear what you are saying about people on the breadline not caring about a penny off a tax bill. Sadly, the current crisis will mean a big step backwards in terms of climate issues/green energy – people will turn a blind eye to the firing up of old coal stations/nuclear power stations if they can continue to charge up their phones/get the internet, rather than face power cuts/rationing due to poor green energy distribution/storage. Yes, there are more wind/solar farms but we’re not there yet and building more will take years and not solve the current crisis – people are used to things happening now rather than later. Let’s hope businesses do take the long term view and shift their focus otherwise they won’t be around in the future. As for the Tory leadership, the candidates are brave or foolish (or both) as whoever wins will just be eyeballs deep in a sh*tshow of a predicament.
Your “Finally “ -Frederick Taylor’s book on Hyperinflation and the destruction of the German middle class gave me a severe tremor !
So apposite -I hope history doesn’t repeat itself for the now main player and paymaster of the EEC since we left
xxd09
The fact that new homes are being built now that aren’t required by law to have solar PV, heat pumps etc. just shows how the big housebuilders only care about maximising their profits and that the politicians (who I suspect are lobbied pretty hard by those companies) don’t have the intelligence/bottle to make such legislation.
The politicians have, as ever, such a short term view that their only concern is not making policies that might upset their core voters. As @JDW says, politicians can be mature statesmen but they only seem to become so after they’ve left office.
I read some of Dominic Cummings stuff and, while he is a divisive figure, he seems pretty on-the-money to me about the lack of seriousness and knowledge of those in Government (including the Civil service) about science and tech.
I always enjoy your weekly link roundup. I wondered have you considered including relevant and interesting Youtube videos? Off the top of my head the below channels post content which may deserve consideration for your roundup, but I’m sure there are many more!
-Pensioncraft’s channel – Ex bank strategist talking about economics and investment, UK based, frequent videos:
https://www.youtube.com/watch?v=KabBDlggtyE
-Chris Bourne’s channel – UK tax and investment planning, often from a financial independence perspective :
https://www.youtube.com/watch?v=JBwyMe4oJZ4
-Ben Felix’s channel -Portfolio manager, whilst he is from the US his videos are always interesting and well researched :
https://www.youtube.com/watch?v=RsDKBDPXK7M
@GFF
10 years ago electricity storage on a household level was incredibly dear, I’d say that would have been a misallocation of capital. Some things are just better done at scale. Indeed I would hate to be in a house living next door to a Tesla Powerwall owner, because how the hell do you put the fire out, even if it starts elsewhere in the house? You aren’t allowed to even think about holding the equivalent amount of petrol in a domestic building – a 14kWh powerwall is the equivalent of about two litres of petrol, perhaps 5 but not more than 10 as electricity for a generator. If you’ve ever had to try and get rid of unused used chainsaw twostroke that makes a hell of a fire. As the UK HSE regs say
> petrol is not stored in your living accommodation
Personally, I’d say if you want to invest in renewables, do it using ETFs, a small slice of a big scale operation. Rinky-dink solutions may give people a nice warm fuzzy feeling inside, but scale is what’s needed here. Go big or go home.
> But just imagine if every household had have invested a thousand pounds into the inevitable choice of wind, solar and electricity storage 10 years ago alongside upgrading the poor insulation standard of British homes?
I know people go on and on about this, by WTAF, people? I accept renters don’t have any good option, though that is in fact a different issue associated with the mollycoddling and indeed tolerance of amateur landlords and the weak security of tenure in the UK which shifts the power balance. I do feel for these guys, but in the current regime they just don’t have any good options. As for the rest – there are three big wins for most British homes. Loft insulation, cavity wall if applicable and double glazing if applicable. Loft insulation is an easy though not hugely pleasant DIY job and the materials are dirt cheap and require zero skill, I even did that job in my first house back in the early 1990s, and when I did it again in my second house in the early 2000s a roll of insulation was less than £1 at B&Q because it was apparently subsidised. I’d hope things like draught-proofing aren’t an issue any more (largely as a result of double glazing) but if they are the materials are also cheap and DIY.
Cavity wall insulation and double glazing are professional installs, natch, though I don’t think unbelievably dear, I had that done on my second house and wasn’t on beans and rice for a year afterwards.
I’m not even that sure about solar panels on houses, if you have to subsidise it then there has to be a question mark. And to be honest, as someone paying for people to be subsidised to put poncey micro solutions like that, it jars me off to carry that sort of thing in my power bills.
I’m also unconvinced on the heat-pump shibboleth at the moment, because electricity is loaded with extra costs so it costs 3x the price per kWh. You will prize my gas boiler from my cold, dead hands if the nominal saving in efficiency on power consumption is being paid out to people’s vanity protects like solar panels in the extra loading on electricity prices.
In general, microgeneration is inefficient and costly. As David MacKay in without the hot air sums it up nicely, every BIG helps. And in the classic 1970s US mantra, weatherise before you solarize – drive out waste first.
So yeah, no problem with investing in renewables, but do it through your stockbroker 😉
@ermine our neighbour redeveloped their house and put in a heat pump – air or ground, I can’t remember. The “plant room” with all the pipe work is huge – much larger than an old fashioned airing cupboard. They wanted all the pipes inside the house but even so, it’s a lot of gubbins I hasn’t realised you needed. No idea where the space in a new build would come from.
I am in favour of Local PV though. Two other neighbours have 1990 houses made at the same time, everything is electric (no oil or gas). One has PV cells and is paying maybe 1/10 what the other neighbour pays on the electric bill. No feedin tarif so excess goes to heat the water tank. Certainly worth the installation expense.
I’ve got solar panels. As a solution to national energy security they feel like a misallocation of capital as they don’t produce electricity when it is most needed. I bought them as I concluded I didn’t want to be subsidising someone else’s “poncey micro solutions” 🙂
They produce a lovely headline figure near midday in any season except winter. When is peak demand? Winter, especially in the evening, and we don’t have an economical way of moving the peak summer output to when it is most needed.
The behaviour is clearly visible if you look at https://gridwatch.co.uk/ ‘s “Last Year” graph – there’s a healthy streak of yellow solar in the summer which progressively disappear as you move towards the higher winter demand. If we’re going to have a good solution for the depths of winter, that should easily cover the lower summer demand rendering them redundant.
In a way, subsidising them in the UK does the planet a disservice as we increase demand and hence cost, potentially reducing their deployment in latitudes they are a better fit for.
@xeny, add a battery and see how things change. You’d be surprised.
I live in the Pennine’s, although we have now several wind farms nearby I can’t understand why we as a nation haven’t developed extensive hydro plants in areas such as this where there are many existing reservoirs.
It seems in some parts of the world it’s common for rural communities to use this as a power source.
As a nation we’re not blessed with year round sunshine but we do have a prevailing wind, lots of coastline and generally plenty of water. We should be harnessing these natural resources.
On an inflation tangent:
I’ve only just learnt that a DB pension scheme of mine will use up much of my annual allowance this year, even though I’m not making any new contributions to it.
Could be worth revisiting ‘input amount simulation’ to check how it works when inflation is rocketing up?
https://monevator.com/the-annual-allowance-for-pensions/
Before anyone panics: the devil is in the details of each individual DB scheme so YMMV. But I’m glad I learnt more before making additional contributions to my SIPP
My argument against people who rail against both politics and capitalism has always been that under such systems we get what we vote/pay for.
We say we don’t want soundbite politicians and we want MPs to treat us like grown-ups, yet we vote for soundbites and semi-cancel politicians who happen to speak out of turn on some contentious issue (the war on drugs, say, or more recently the downsides of Brexit).
Similarly we say we want companies to be greener et cetera, while reading such articles in the Guardian in the departure lounge for a tenth mini-break of the year. (Anyone who knows 20-something young professionals without kids knows this is only barely an exaggeration).
More recently however I think this doesn’t quite work as well as it did with politics — both in the US and here — because the main parties have been captured by their fringes. Labour/the Democrats by more left-field cultural/sociological issues, and the Tories and Republicans by their right-wing factions.
Think Momentum’s incursion into Labour and making Corbyn leader, or of course the Tory party lurch right to the Euro-sceptic wing to deliver a Brexit the masses were hardly clamouring for ten years ago. Or indeed the abortion debates in the US where the broad majority are in favour of the status quo, or at worst some tightened rights to choose under defined terms.
And now we’re seeing this in the Tory leadership debate, which basically sounds like two rich heirs trying to convince their grumpy old Uncle Barry Blimp who is stuck in the 1950s to leave them the family silver.
I’m a bit more hopeful with capitalism, however, where companies have been filling the vacuum left by politics, particular on green issues in the US but also on some broader social issues. The young get a lot of credit for this, though it can certainly go too far IMHO (back to social media-led extremism again).
As for solar PV as far as I’m concerned it’s a done deal now and should be widely rolled out with one caveat, which is I keep reading nasty things about end-of-life recycling. But otherwise I’m fully in favour of a broader more diversified grid. We could get over issues such as seasonality with storage and/or more structural solutions (e.g. high altitude reservoirs pumped full in summer when homes are drawing less power from the grid, or intermittent gas at a pinch/stopgap).
I’m also in favour of course of more large scale stuff like dams and tidal, but it’s very hard to get past local opposition. A good example is the seaside town of Swansea which has been debating a huge hydro generator in its bay for the best part of a decade.
Reluctantly I do think nuclear is back on the table, too, but I’d want it as part of a re-engineered grid.
I think it’s harder than it seems to invest in this for the average risk-neutral investor. (It’ll screw up a passive strategy for sure!)
I’ve owned renewable trusts and VCTs on and off, currently have UKW and TRIG but they probably won’t be there for long. I also own a Swedish heat pump manufactuer (Nibe) and of course a shifting allocation to Tesla.
Threats to hit renewable generators with windfall taxes hardly seem to be coming from the right place.
And I definitely shout “hear hear” to comments about the foolishness of rolling back penalties specifically designed to discourage fossil fuel use, with the caveat that this current crisis is clearly immense and we can’t expect poorer people to carry anything like equal absolute load, it’ll cripple many of them. (Assuming they could even pay £5,000 a year which is doubtful in many cases).
I wouldn’t expect *anything* from this government though, which is mostly a handpicked collection of the C-team designed to push through Brexit, itself a funnel for selecting for poor judgement in most cases.
There are probably still some capable civil servants around who might be able to come up with a short-term plan though.
@TI
>We could get over issues such as seasonality with storage and/or more structural solutions (e.g. high altitude reservoirs pumped full in summer when homes are drawing less power from the grid..
Every time I’ve done the arithmetic, we can’t. Take https://en.wikipedia.org/wiki/Dinorwig_Power_Station – it holds 9 GWh, which is rather less than the amount solar is generating _today_ and as it was one of the first such installations in the country it had first pick of location. We don’t have the geography to build remotely enough of those to store solar energy across seasons.
If our goal is net zero, we need something that provides in the winter as that is the hard problem. Solar is great for the individual, or for society feel good effect, but does nothing towards solving that, hence my conclusion it is a distraction encouraging misallocation of resources.
@BBB – a battery would be great for spring, summer and autumn mornings/evenings. It does nothing much useful in the 3 months centred around the winter solstice as there isn’t enough generation to fill it.
@xeny — Reasonable minds disagree on this, clearly. I think what you might be missing is it’s not one thing. It’s *everything*.
Distributed energy grid, local storage (@ermine is wrong about this IMHO), large scale pumped storage, battery storage, far more insulation and efficiency (@ermine is absolutely right about this!), and intermittent back-up/winter energy from limited fossil fuel use (likely gas), as well as carbon capture and re-forestation.
At the risk of sounding woo-woo, the world’s ecosystem has been a distributed energy grid — once you’re past the sun, admittedly — for hundreds of millions of years.
Our non-transport grid is basically burn fossil fuels in a few ginormous bonfires or else eat it, after liberally dousing it with the products of fossil fuels too.
Transport we did build a distributed grid. I’m sure it would have sounded daunting in 1900 too. 🙂
The current market rebound provides further evidence, if required, that time in the market, as opposed to timing the market, is the most appropriate strategy for the vast majority. Whether this turns out to be a bear market rally or the end of a brief bear market, many will hypothesise, very few have any real idea.
The latest UK trade deficit of £28bn released the other day is shockingly bad and reminds the casual observer of our increasing reliance on the continued willingness of overseas investors to acquire our assets or lend to us. Own some UK assets (e.g. your house, a business, property) but diversify internationally or away from £ / UK – Global Equities, Bonds & Gold.
It is notable to stop and think that every mainstream party has now normalised the idea of borrowing to fund day to day expenditure and shows how far we’ve gone down the road to inflating away a nominal currency since the start of the financial crisis 15 years ago or so. Borrowing money to fund investment – maybe, to fund day to day expenditure – just makes the problem worse.
When reading the comments above on either the gov or climate change generally I am continually reminded of Joseph de Maistre, the 17th century french philosopher who expounded that every nation gets the government it deserves.
The reason for the current situation therefore is your fault, and my fault as it goes and everyone else’s fault. Abraham Lincoln said it best – of the people, by the people, for the people.
For example – for anyone lamenting on about Truss vs Sunak debacle ask yourself why you are not a member of the conservative party? All they are quite rightly doing is pandering to their membership currently. And that’s very sensible for it’s the membership who will elect them. If the membership was comprised of people with very different views you can be sure that either (a) they would have different views (b) there would be different people standing. It’s always amazed me why people bother voting but aren’t members of the conservative party – you have significantly more leverage and ability to create change than at the voting booth. And I say this without being a conservative supporter really. And if your view is, I can’t be bothered / don’t want to be part of that etc – totally get it but that’s why things are why they are….
It’s very easy to blame the govt, as it stops us looking inward at ourselves, when the reality is, politicians rarely get elected for promising long term investment, which has economic costs with short term pain. Only when the current situation becomes intolerable are people willing to accept the necessary pain and rise up. I guess Sri Lanka is a good recent example.
Take climate change, I recently had a delightful conversation with a climate change evangelist who was rather negative with my current plan to run an old diesel into the ground hinting I should be doing more for the environment. When I pointed out that their trip to New Zealand last year had eaten up their entire carbon budget (see below) for several years the mood turned decidedly sour.
Scientists seem to be estimating that we need a limit of two tonnes of carbon per person a year to reduce the forthcoming temperature changes. Have a go at this questionnaire and see if you can get yourself below two tonnes.
https://www.nature.org/en-us/get-involved/how-to-help/carbon-footprint-calculator/
I couldn’t get anywhere near…….
The answer is, it’s virtually impossible and requires huge changes to your lifestyle, which the electorate has no interest in doing imho given the queues at Gatwick / Heathrow this summer. And that is why politicians, haven’t and won’t take any of the necessary steps. Air travel needs to drastically reduce. Good luck with that one.
I’ve not been on a plane since 2019 and hence have a holier than thou attitude but it doesn’t really jive with my plan to travel the world once I’ve changed my name from Seeking Fire to Checked out and Fired!
It’s not just flights….it’s everything.
I’ve also never really understood the ‘destroy the planet’ message. Even if you let off every nuclear bomb, the earth would be just fine. Seems generally acknowledged that it would create an extinction event to rival the Cretaceous-tertiary, Triassic-jurassic events 65 or 210 million years ago and thus all life would be wiped out but worth remembering everything today that’s around us followed those events. So humanity might have gone but the earth – still thumbs up and absolutely fine thanks……..
I’ve come to the depressing conclusion that given the impending population growth to 11 billion forecast (Lagos will have a greater population than the whole of the UK towards the end of this century), the effects of climate change are going to happen, are not going to be stopped and the best approach is to prepare for it both on a society and an individual level as best as one can.
It’s always been a mystery to me why more of the electorate hasn’t figured out that energy independence is a win win all round – win for those worried about climate change, win for the hawks who worry about national security, win for those who worry about the economy.
Whilst no person is an island, as the pandemic amply demonstrated, I continue to try and figure out ways long term to make myself less dependent on others.
I’m not bearish – mostly in equities therefore I have to be an optimist!
@Mr Slow — Re: videos, there are two reasons I very rarely feature them, though the odd one gets in.
Firstly and most importantly I don’t watch them much, unless I’m working out when I tend to watch non-financial ones. I find them easy to watch but hugely time intensive. And I hate how hard it is to refer back and forth in a video.
Given I don’t watch them much, I wouldn’t be confident of curating them.
Secondly Monevator is slowly losing its traffic to video and TikTok, among other problems we have haha, probably partly for demographic reasons. We should probably join them rather than sulk in our tent but the tedious anonymity thing gets in the way of that.
I might de-anonymize soon though just to freshen things up, so maybe I’ll finally do some video. (I actually bought a tripod and lights at the start of lockdown, but never got around to it. 🙂 )
@ballard
Yes, the DB annual allowance is a mess. Whilst it has been nice to have had one for a long time, my scheme has recently closed to new contributions. I’d been inside the annual allowance and had noticed quite a variation in deemed contributions but had never exceeded it. However, I am lucky in the sense that on leaving the scheme as a contributor, I can “make up” contributions to round up to the nearest full year.
Again, luckily, I had the opportunity to buy back nearly a full year under this arrangement. But this gets assigned to the current tax year for annual allowance purposes. I got quite a shock at my deemed contributions for this year and have had to use up most of the previous three years unused allowance to avoid being taxed.
First world problems for me I know, but the whole situation is a mess, in terms of annual allowance for DB schemes and lifetime allowance for DC schemes.
It makes no difference which party is in power, none of them can implement policies in the longterm interest of the country, because the system dictates only a few years between elections. Policy is therefore focussed on remaining in power, which requires broadly doing the bidding of big business and US foreign policy, itself dictated by US business interests. It’s a hopeless situation, but any politician with ideas that threaten this status quo will never be allowed to progress far enough to get into power.
@TI my objection to local storage isn’t from an electrical engineering POV. That sort of thing can reduce the peak to mean ratio of demand, done right, which in any distribution system always saves costs. But Powerwalls scare the shit out of me, to the extent I am glad I live in a detached house with enough space that if some moron chooses to take that risk themselves the fire brigade have some chance to save me.
This is a Li battery energy storage system fire.
https://youtu.be/8nz5ijXcckI?t=200
You really don’t want that under your stairs. Now if it were building regs that you can only put the damn thing in your garden and the same rule as UK shed rules (most often observed in the breach 😉 of being at least two metres from the boundary, fine. For all I care, stick four wheels on it and call it an EV car and park it on your drive, though should I get an EV in the years to come there’s no way I am parking it in my garage which is under the house. At least that saves me clearing out all the junk in there 😉
Yes, petrol is also scary as any Hollywood movie will tell you. But much of the risk is in transfer, fuelling and defuelling, and these tend to be done in highly regulated spaces, and not usually when people are asleep. A powerwall transfers energy all the time, though it seems charging which is the particularly hazardous part of the cycle for Li batteries.
I tend to agree on the need for diversification regarding energy – micro and macro interventions all have a role to play. Battery/storage tech seems to be finally catching up.
The “destroy the planet” message has been far more subtle than that – for decades – if you care to read more deeply. The “planet” is simply a proxy for “life as we know it” – whichever bits are important to you – whether its other humans, your pet or even a new iPhone. The current set up is fairly conducive to human civilisation as we know it, and most of us would probably like to keep eating, breathing etc for as long as possible and maybe even extend the same to our children, grandchildren etc. Crapping where we live makes it a lot more difficult, perhaps even very difficult in the medium to longer term.
@Simon
Similar story for me – I think carry forward will solve it, depending on Sep CPI and other factors.
And I’ll have to restock that buffer in the future, i.e. I won’t try to use the full 40k each year.
There are some wonderful thoughtful comments on this post. It never ceases to amaze me how we all, as individuals, see things differently.
My take is, I guess, a Stoic one (in the sense of the philosophy of Seneca, not the stiff upper lip). One of my favourite Stoic quotes is “Life is very short and anxious for those who forget the past, neglect the present, and fear the future”.
If one looks at past history we find that Alpine glaciers were green trade routes in Roman times. We also know of mini ice-ages and medieval warm periods. It would be very strange indeed if such a complex system as our climate was completely stable and, indeed, what we see is oscillations around a mean. I would urge everyone to read about Gaia, a concept proposed by the recently deceased scientist James Lovelock. The Earth can be thought of as a living being that self-regulates as long as it is left alone to do so. What we can’t do is to rip out Gaia’s vital organs (the oceans and the forests) and still expect all the negative feedback loops to function properly.
Human’s have become very arrogant recently (especially over the last two years). We think we can change things that are bigger than us. We really can’t.
Another Stoic concept is Momento Mori – Remember you will die. Spend your life being kind to other people, and don’t fret about the future!
@xenu #14 Renewables are diffuse and so one specific tech won’t be a year-round answer. Indeed, looking at gridwatch you cited there’s a cogent argument to be made that solar and wind are complementary over the annual cycle. I don’t know how much of the solar is people’s ‘poncey vanity solutions’ as opposed to larger scale solutions, which in Somerset seem to be compatible with sheep and some degree of farming.
I have operated a standalone solar solution on a smallholding. I installed it in Autumn, and it is truly depressing to observe the rapidity with which you lose the fight as the autumnal equinox is passed, where the day gets shorter and the light intensity gets shorter too, even if you angle the panels optimally for winter (which you do in an off-grid situation, in a grid tied situation you optimise it for the summer sun, as it’s aggregate output that counts). These guys reckon it is a 7:1 ratio between summer and winter but in practice it’s worse than that, about 10:1.
We have the same problem at an island site here – the admittedly undersized solar panels can keep our lights and radio gear working fine up to about the autumnal equinox, where it’s time to break out the petrol generator.
@TI > the world’s ecosystem has been a distributed energy grid — once you’re past the sun, admittedly — for hundreds of millions of years.
Yeah. but it’s only in the last 200 years that it has had an ever-increasing bunch of otherwise bright hominids aspiring to a Western middle-class lifestyle, which to date has been fuelled by drawing down on ancient sunlight. That gridwatch site shows just how paltry the renewables contribution is at the moment, plus that is just electricity, so the total amount will be dwarfed by the daily energy consumed by aircraft movements. Without the hot air cited one intercontinental trip is the same as 33kWh a day, which dwarfs my household power consumption, as he says
Your great grandchildren are either going to be bloody rich to fly as much as you or a miracle will have occurred.
I agree with @xeny #19 that local battery storage will not average power between summer and winter. Not a hope. Not now, not ever. Regional storage, maybe, though a better bet is probably to use different types of renewables and possibly to upscale to a grid covering multiple nations to fight hourly/daily weather variations, some of this is done now with interconnectors. Of course that implies co-operation and the preservation of societal and technological complexity and an absence of war, but let’s run with that hope.
The fire risk from the equivalent of a day’ worth of energy storage in a domestic setting is bad enough, the concept of six months’ worth of that or about 1GWh is like keeping an medium sized unexploded bomb in your house. In a professional environment that sort of risk can be controlled, we have large scale fuel dumps and airports which go up only very rarely, but in the domestic environment it doesn’t bear thinking about.
@xeny
FWIW, products offering local seasonal storage capabilities are just becoming available for residential properties – using hydrogen microgeneration and storage. But it requires you to have hydrogen storage tanks / cylinders outside your property and is still prohibitively expensive (from what I gather, one system that I am aware of costs on the order of £50k for 1500 kWh; it may get relatively cheaper for larger systems).
So backup power generation is still required in the winter, or large-scale storage. Some European countries are starting to build infrastructure for clean fuels / storage; for example, the port of Rotterdam is building hydrogen and ammonia terminals.
Btw not all regenerative energies peak in summer; for example wind power generation is lowest in summer.
But as others have pointed out, better insulation is still the most cost effective investment in the short term.
@ermine (#25)- This is the main reason I haven’t had solar panels installed yet. Without a battery to be able to store power for the evenings, it’s much less appealing. I have considered having the powerwall in my shed at the back of the garden far away from my house and the neighbouring houses, but I am still not comfortable with the risks.
These solar panel powerwalls are orders of magnitude larger than the batteries used in mobile phones and laptops. You can get a good underestimate on the danger powerwalls pose by looking at what the London fire brigade tells us about laptop and mobile phone lithium batteries:
https://www.london-fire.gov.uk/safety/the-home/electrical-items/batteries-and-chargers/
@Ermine
I didn’t mean that homes should have solar panels on roofs and their own wind turbines.
More that people should have invested their money into hedging their energy bills through investment in renewable energy.
I did this myself as I was renting and didn’t have a roof. Now I have my own roof, the numbers don’t stack up and I invest through invest trusts and the like.
How do people think inflation will reduce when the upcoming massive increase in energy costs hasn’t happened yet? – and the knock on effect that’d have on the price of doing business, future wage uplifts at the bottom that haven’t fully happened yet? – a wage price spiral yet to start, wage rises at the bottom are more inflationary than anything else, and they’ll have to rise eventually if universal credit scales with cpi, they’ll have to raise wages or else there’ll be labour shortages, and that’ll make things expensive.
And either of next PM’s fiscal plans to pump billions more in?
Is it wishful thinking? Short term cpi numbers? Financial experts unfamiliar with the way universal credit uprates with inflation and the subsequent impact higher wage rises at the bottom could have on pricing? A market too afraid to question itself?
The markets got the price of gas wrong, they didn’t see this inflation coming, they can be wrong and I think people have become afraid to question the consensus, thus it self reinforces
@Seeking Fire, cool carbon footprint calculator though I do wonder about the accuracy. I’m a low-consumption vegetarian cyclist, rarely drive, haven’t flown since 2016, in a small 1 brm apartment.. 8 tonnes. I can’t think of any change that is going to reduce that by 75% in the foreseeable.
@Seekingfire you said “For example – for anyone lamenting on about Truss vs Sunak debacle ask yourself why you are not a member of the conservative party?”
for the last several leadership contests I have decided that I ought to become a Tory party member to have a voice, even though it’s too late to qualify for the current round. Then the contest is over, the urgency evaporates and I don’t get round to it. Maybe this time…. I can’t see whoever wins (Truss) staying in power past the next general election
If you’ve a south facing roof the numbers stack up for solar (as far north as Glasgow anyway), albeit with an interest free loan subsidised by the Scottish Government. My initial research also suggests that battery storage is worth it too, on basis that the grid can deposit some of its excess (presumably from wind) with you during the fallow winter period. And if you have an EV the numbers look even better.
The first commenter is broadly right. In any technocratic system we’d have had a renewables sovereign wealth fund investing at scale (and seeing the benefits from doing so, in the economy, energy security and now in returns). Instead we’ve sleptwalked into a largely avoidable crisis while our leaders have played to the dinosaurs of the Tory party membership. The only consolation is that after Johnson and Truss no-one can be any worse.
@Matthew. Global inflation will fall hugely in 2H22. In 2Q22, global inflation stood at 10.6% ar with the energy subcomponent at 36.4% ar. In 2H22, based on current expected moves, that will fall to a headline sub 5% ar and energy subcomponent of around 0-1% ar as base effects drop out. Subcomponents such as goods price inflation have been falling since the start of the year. It’s energy and food that have been the issue. Crude oil is now down 20% from it’s peak and global food prices down around 11%.
That global fall, however, will be very uneven. Parts of the world such as central Europe will see even higher inflation in the next few months. Western Europe and also the UK will also see energy (primarily gas prices) cause further rises.
The market though doesn’t really worry too much about Europe or the UK. It’s knows these will lag and also what really matters is the US. The assumption here is that if peak hawkishness in inflation has passed, then peak hawkishness in Fed monetary policy has passed. The Fed will hike more into year end but by early next year will be done and cutting by mid year.
In the last month, this combination led to financial conditions easing at the fastest rate seen since the Pfizer vaccine announcement in late 20, Fed pivot in Dec 18, and oil price crash in Feb 16. Hence the stock market rally.
Now all this depends on the market being correct about the Fed chair Jay Powell. They know he wants to be seen as Paul Volcker but they actually think he’ll end up being Arthur Burns. He will blink once inflation rolls over and everything will be ok for 2023. Yes, they also think that inflation won’t be going back to the prior low levels and that it will probably end up going back up in 2024 etc. Right now though everyone is happy that a 4% Fed funds level may have been avoided.
For me this all sounds far too rose-tinted. Nonetheless, the market got itself very bearish a month or so ago so it’s not unusual to see these sorts of moves.
It’s impressive that people who don’t feel confident changing the wheel on their car are nevertheless very confident in how the world’s energy systems should be redesigned. After hubris comes nemesis.
Germany’s CO2 emissions increased last year with poor wind power generation (volatile, no storage) having to be replaced with coal power (stable, on demand).
It is not for lack of appropriate will or ambition. These are exceptionally difficult problems requiring exceptionally difficult solutions. Fortunately the story of mankind is a sequence of these.
There is little distinction between energy and wealth. Reducing energy consumption is reducing wealth. It is correct that this conclusion is not readily reached. It is not helpful that clarity in the ongoing debate is made opaque by moral grandstanding.
I have posted this before, but it is not a foregone conclusion that climate change is the right goal to focus on: https://www.copenhagenconsensus.com/post-2015-consensus
@E&G #36 > albeit with an interest free loan subsidised by the Scottish Government
so it doesn’t cost in, and other people are paying for this vanity project, gallingly through the electricity part of their increasingly unaffordable power bills. Go to any bank and ask for an interest free loan, and you will get short shrift. If it costs in with a standard commercial loan, fair enough, borrowing to invest is standard practice for any business proposition.
> My initial research also suggests that battery storage is worth it too, on basis that the grid can deposit some of its excess (presumably from wind) with you during the fallow winter period. And if you have an EV the numbers look even better.
Let’s get some basic science into this subject. The usable battery capacity of an EV car is ~100kWh for a top of the range Merc. Ovo energy cite yer average UK semidetached house as using 4GWh/year (excluding space heating). I find this believable, it is a little over my usage, and I have taken steps to fight down electricity usage. Let us say you want to bridge the gap for six months, and ignore space heating. That’s the capacity of 20 top of the range Mercs you’re going to have to park on your suburban drive just to store your usage for six months. Tesla tells us a Powerwall 2 is 13.5kWh, so that’s 148 powerwalls, at USD 7500, so that’s over £800k capex. OK let’s say you can halve that because you get a quantity discount and don’t need 146 of the inverters, but I’d say even at current electricity prices of 28p/kWh so annual cost of say £1500 p/a your payback to breakeven period is over 200 years, even if you could reduce your actual energy input costs to zero in return for storing this for them.
The energy stored in this lot is the equivalent of 2 kilotons of TNT. You have to ask yourself, do you feel lucky? As a guide, in the equivalent kilotons of TNT article on wikipedia, they cite a test atomic weapon detonated at the Nevada test range in 1951, which was 14kT TNT, so you are a 10% of the way towards that sort of energy release should this sucker catch fire. Sure, it won’t go up like an atomic bomb, but it’ll burn for a long time.
It’s always worth doing the basic arithmetic when qualifying energy projects. Battery storage to level day/night peaks and troughs may cost in though it still should be done at regional or district level. Seasonal variations, I hope that regulations are put in to stop people from keeping a fair proportion of an atomic bomb’s worth of stored energy in their houses. We may well do that on a larger scale, but I want professionals watching this sort of thing all the time and a 24/7 rapid reaction team at the ready.
Couldn’t agree more on the sovereign wealth fund, but it didn’t happen that way. The North Sea may still offer us some energy opportunities in its wind resource.
@ermine, I’ve not done the sums on the cost of finance but it would surely just push the payback period by a few quarters. So it’s viable without any subsidy (which comes from general taxation/block grant and the numbers will look better the further south you go. I’m no expert but largely think we should be doing the low regrets stuff that reduces emissions, increases renewable production etc at little cost while they are developing the big ticket, big impact stuff.
E&G. “The only consolation is that after Johnson and Truss no-one can be any worse.”
That was tongue in cheek surely? Braverman, Badenoch, JRM … Steve Baker! Aargh. There is plenty of further room to fall. We aren’t that far way from a Le Pen character as PM.
So Starmer has announced his preferred approach of capping tarrifs at c. £2000 for the average house, if I have understood it correctly.
Whilst I agree with the intention to limit costs for the vulnerable, and this is substantially better than anything suggested by the Conservatives, I am still left with questions.
Specifically, how will the power retail companies be reimbursed for being forced to sell power at below market price? There is a distinct lack of nuance (or even understanding – see Owen Jones recent Guardian article for example) of where the profits are made in the energy supply business.
The pure retailers are simply passing on prices charged by the generators/extractors. The latter are currently making out like bandits, but retailers will go to the wall if not supported properly. Indeed, this is what happened earlier in the year. Note, I don’t remember politicians shouting about rescuing the primary extractors when oil was 20 USD/barrel and below their operating costs.
I stress, I’m not opposed to SKS’s idea in principle, but that I think what is needed is a properly constructed framework to manage this situation, which includes understanding where the costs will fall and how they will be ultimately reimbursed.
My tuppence worth would be a Social Tarrif, applicable below a certain income threshold. Losses attributable to the supplier for the Social Tarrif to be reimbursed by a UK wide fund itself supplied by a levy on all UK suppliers in accordance with market share.
Disclaimer – I work in the UK Electricity Supply Industry.
I know quite a few vulnerable with better cars than me more money and nicer houses.Mind you I do still get up in the morning for work. Perhaps that’s the secret.
@ermine — Thanks for bringing an engineering perspective to this whole issue. Perhaps I’d insufficiently considered the risks from battery installation, so it’s been interesting to think about that.
With that said I can’t help thinking you’re being a little colourful with your maths, comparing streets equipped with electric storage to nuclear explosions and whatnot.
As of November 2021 Tesla had installed 250,000 Powerwalls globally. Given its run-rate of installation that’s probably up to 300,000 now.
I can’t find a single instance of an explosion or even a fire with one of these Powerwall units. There was a fire with a ‘big battery’ industrial installation of Tesla’s in Australia, but that appears to have been an experimental unit anyway.
Tesla has also deployed at least a couple of million cars now. There are at least six Teslas within a five-minute walk of my apartment. (Lah-dee-dah, look at my neighbourhood… 😉 )
I have to say I sleep very soundly at night despite being surrounded by all this latent storage energy just waiting to go off. 😉
True unlike the Powerwalls there are instances of fires with the odd car crash. Humans driving around on top of a big battery at speed is more risky than something sitting on a wall, obviously. But even then the instances are vanishingly rare, to the extent the car is generally considered far safer than combustion engine models.
Granted when a lithium battery does catch fire it seems much nastier than a traditional fire to put out. Perhaps it will always be that way, or perhaps we’ll develop new methods with experience. But certainly there’s no wave of lithium battery fires keeping EVs off the road. Far from it.
As for the storage energy in a street sums in general, well I’m sure if you put all the houses in my road into a bomb calorimeter and ran the numbers you’d see a scary amount of destructive energy waiting to go up. And it’s not like it doesn’t happen. Houses do burn down. Gas boilers do fail. Etc.
But we get by. It’ll be the same with this technology, IMHO.
Cheers to you and everyone else for this great conversation!
@Ermine #39> “Ovo energy cite yer average UK semidetached house as using 4GWh/year (excluding space heating). I find this believable…”
It’s actually around 4MWh per year, not 4GWh –
https://www.ovoenergy.com/guides/energy-guides/how-much-electricity-does-a-home-use.
Your Powerwall calcs used the correct figure (4MWh) but then I think you did the scary bit at the end using the 4GWh. With 4MWh it comes to around 3.4 tons of TNT, not 2000 tons. Compare that to a couple of Mondeos parked outside your house, with full tanks of petrol, 53 litres each = total 1.0 MWh of energy = 0.86 tons of TNT. So the 148 Powerwalls have the equivalent energy of 8 family car fuel tanks.
A 1200 litre domestic heating oil tank typical outside off-grid houses in the countryside has 12.4MWh of stored energy = 10.7 tons of TNT, about 3x the amount from 148 Powerwalls.
@Simon — I agree. About a decade ago I evaluated Centrica as ‘boring’ dividend play, a sort of bond proxy. But I didn’t like the look of all the incursions into the market from new entrants, its terrible reputation, and the UK’s politicised regulatory regime.
A fortunate call as it haemorrhaged customers for years and plunged into accounting losses, though from memory it maintained the dividend, probably out of debt. The shares fell about 80%
So it was a horrible business for a long time. Perhaps it’s now better placed with so many rivals going bust and the market having rationalized (a look at the chart suggests the story has changed) but this has not been a cash fountain for a long time.
As for the oil majors like Shell and BP, nobody was offering to bail shareholders out when the price of oil was briefly less than $0…nor when their share prices languished as every ESG fund and public spirited pension fund either bailed out or strongly encouraged management to stop drilling for oil.
The businesses are cyclical and it is silly to judge them on peak profits.
With all that said, I am equally hugely sympathetic to UK households facing this batshit energy price shock, whether it’s come about through war, Covid/lockdown consequences, a lack of capex, the environmental agenda, or political short-termism — or a combination of all the above.
It’s clearly something they are suffering through no fault of their own, and no personal finance guide suggested people took out insurance in case energy bills quadrupled in a year. I also think it behooves those like me who believe we need to get greener with our energy mix yesterday to ensure poorer households aren’t bearing a disproportionate load due to the essential nature of this commodity, because that leaves them easy prey to seductive (but entirely incorrect) messages that it’s all a con.
(I can entertain that the rapid climate change we’re seeing might prove to be at least in part due to non-human factors, though I believe the preponderance of science that puts that at <1% last time I looked. I see zero evidence of a 'con', not least because following the money shows that most of the people with the most resources and power would be on the losing side of that con...)
So yes, we need to cap, maybe as Starmer suggests. But we have to understand, as many people failed to understand with Covid relief etc, that there is a wider cost to this that will need to be borne somewhere. And 'the fat cat shareholders' isn't going to cut it for me long-term.
@ballard – are you saying that being in a DB pension takes up annual allowance *without* having made a contribution in that year? What fresh bureaucratic hell is this?
Solar energy indeed is of little use in the UK in winter, but wind energy is great then. In the UK, wind turbines generate twice as much in winter as they do in summer. Wind & solar are largely complementary – if we have both we need less storage.
Current lithium battery technology is not economic beyond a few hours or days storage, and I can’t see it ever being cheap enough for seasonal storage. But lithium batteries were developed for mobile applications like phones, laptops, and cars, where small size & low weight are critical. For static energy storage at industrial scale size & weight are a minor concern (think rows of shipping containers in the middle of a wind farm), so an entirely different battery chemistry that is much cheaper but heavy and/or bulky could change the game entirely. There are lots of people working on such ideas. As an example I like the concept of the Ambri ‘self assembling’ liquid metal battery. https://ambri.com/technology/.
There’s also now lots of activity in making synthetic fuels using renewable energy, and it would be very feasible to store such chemical fuels on seasonal scale – we’ve been doing that for decades with natural gas.
Are powerwalls and similar large home batteries really such a fire risk? I have not heard of any house fires caused by them. Lithium batteries mostly catch fire due to overcharging, overheating, or being punctured. With a big expensive battery there will be monitoring & protective circuits to maximise battery life and these will protect against the first 2, and puncturing is improbable in a house environment. I’d be far more worried about smaller lithium batteries – eg ebikes, electric strimmers etc – which have poor or no protective circuits, and are still quite big enough to cause an uncontrollable fire. I have certainly heard of house & car fires due to such batteries. And yet, I charge my ebike battery inside and I don’t lose any sleep over it.
@sparschwein
My understanding, as an engineer not an accountant, is; in principle yes, but for it to be significant in practice it would be an edge case. Here’s how I understand you calculate your Pension Input Amount in a DB scheme:
Step 1 Capitialise benefits at start of tax year – DB annual pension value is final salary * years accrued/scheme divisor (typically 60). Multiply by 16 (somewhat arbitrary figure agreed by HMRC – it seems too low but I’m not arguing).
Step 2 Apply uplift of CPI (negative CPI doesn’t count!)
Step 3 Capitalise benefits at end of tax year as above, typically with an extra year accrued and possibly an inflationary uplift on salary.
Step 4 Subtract Step 2 from Step 3 to get deemed your contribution (Pension Input Amount – PIA).
So a rule of thumb PIA for a “standard year” is current salary * (1/60) * 16 (or apply your scheme’s divisor). In practice the PIA should be provided by your pension scheme administrator.
What I was seeing was significant variation in a “standard” contributing years PIA. I guess this depended on whether the inflationary salary uplift matched or beat CPI inflation (no progression element applied to me). If you have quite a few years in the scheme this can amplify the effect.
If you didn’t contribute (i.e. add a year, or fraction of a year if part time), if your scheme is generous e.g. uplifts in line with RPI which is typically greater than CPI, or better, I think you could generate a positive PIA. Alternatively you could get a large salary rise and if you are still a member of the scheme but not contributing, I think you could generate a positive PIA.
I think only the latter case above would generate significant amounts unless the pension was very large overall, in which case you’ll hit lifetime allowance issues anyway. I think it is an edge case because I understand that schemes like this typically close and then adjust your “final salary” in line with inflation rather than real salary. Not many would be non-contributory members of an open scheme and would get a significant pay bump.
As I said, I’m an engineer, so don’t treat any of the above as authoritative. It’s just my understanding and I’m happy to be corrected.
Increasing consensus that we can have 100% renewable energy by 2050 or earlier: https://www.helsinkitimes.fi/themes/themes/science-and-technology/22012-researchers-agree-the-world-can-reach-a-100-renewable-energy-system-by-or-before-2050.html#.YvPUxCrrWdI.twitter
@Al #45 > With 4MWh it comes to around 3.4 tons of TNT, not 2000 tons.
Absolutely, and my bad, I am relieved that the nuke comparison is not the case 😉 The calculator retained the right values, thankfully, despite the brain fart of 1000kWh to 1GWh.
The heating oil is, to a first approximation, red diesel. Diesel is the devil’s own job to set fire to accidentally, not like petrol. And it’s not inside your house.
@ Eadward #48 > so an entirely different battery chemistry that is much cheaper but heavy and/or bulky could change the game entirely.
Scottish power is doing this at the Port of Felixstowe in Suffolk. What that press release omits and the newspaper reports also miss is that SP have a large wind resource and more planned off the coast of East Anglia, and the interconnector has landfall near there, which will be the input. Felixstowe is a large container port and can use a lot of this in the port.
@TI > I have to say I sleep very soundly at night despite being surrounded by all this latent storage energy just waiting to go off.
That’s because they’re outside the house. I’ve seen cars catch fire, they don’t normally take out the houses they’re parked outside. The load on the power grid is typically lowest at night so load-balancing use of powerwalls would charge at night. Where they’re used for buffering solar, then the risk’s not so bad at night, natch 😉
I don’t have anything against powerwalls, but they should be stored outside the darn house, in the same way as other concentrated energy sources are required to be.
@sparschwein @simon
As I understand it, if you are still a member of a DB scheme and the final pensionable earnings have a link to inflation, then the simple revaluation of the stock will use some allowance, even before you make any new contributions.
Simon’s description of the calculation looks right and with some engineering maths, you can boil the allowance usage for the stock down to:
Starting benefits x 16 x (new CPI – old CPI)
Take someone with 10,000 gbp credit in one of the civil service schemes with an inflation underpin. If CPI is 10% this Sep, then even before any new contributions, and without any pay rise, they will use 11,000 of their allowance:
10000 x 16 x (0.10 – 0.031)
It the inflation differential that’s the issue.
Do we know if these energy price rises are permanent inflation or “just” a short term blip?
Thanks for a fascinating insight into the world of battery storage technology to which I know nothing about as well an interesting debate regarding renewables.
@ Simon – I see Labour is suggesting a price cap should be £2k. Wonderful leadership from KS following on from the likes of Gordon Brown who was similarly statesman like in calling for an emergency budget….slight issue is and here’s the annoying rub, they’re a bit light on how to pay for it, real bore that. Seems like the bill could be around £36bn – obviously this is just ‘temporary’ support don’t you know although at these times I’m reminded of Milton Friedman who commented there’s nothing so permanent as a temporary government programme…mmm what happens if Russia/ Ukraine drags on? Raising basic rate of income tax by a penny brings in about £5bn, ditto NI – so if we raised basic rate of tax by 7p in the pound for year that might do it although it would guarantee a change of govt at the next election, so don’t think that’s on the cards. Much easier to just crank up the printing press, wouldn’t you say? After all net debt is now £2.34 trillion – what’s another £36 billion. Which is precisely how this would be largely paid for bar some potential additional tax on the O&G industry or wealth tax that will be fiddling around the edges to obscure. Rather like Sunak’s attempt to link a 1% NI increase to paying back the CV debt – mmm £4bn annually on £400 billion of borrowing gets me there in around 2060 odd. So this will just be another step to debasing our currency that really started picking up in 2008. I’ve often thought one of the biggest societal changes that the pandemic has brought is the normaliation of govt stepping in. Not that I disagree that something needs to be done nor that the govt did the wrong thing at the pandemic. But it’s easy to spend other people’s (specifically future tax payers) money / wealth when your not going to be responsible for dealing with the consequences – that’s not statesman like in my eyes.
@ZXSpectrum48k – thank you for response, ahh yes global is the key word, I had my eyes on UK too much, and as you say base effects and elsewhere round the world energy responded differently too/ was capped
Do wonder though if what might cause us to have a wage price spiral might happen elsewhere round the world too, maybe the knock on effects of uprating benefits with inflation will force wages up to tempt people into work, nomatter what the interest rate
@Simon @ballard – Thanks that’s very helpful. This is an old DB scheme I haven’t given much thought after leaving. It will depend on how they handle inflation. I suppose in previous years with moderate inflation, the effect would be small but it could be significant this year.
@ sparschwein
I should make clear that I’m not talking about deferred members of DB schemes – I think they are safe.
When I said ‘no contributions’ I meant situations where people aren’t gaining extra years of service. Lots of civil servants like that – gaining service in alpha instead of legacy schemes but still have a live link between current salary and legacy schemes. Input amount values for legacy schemes could cause a few surprises there.
I have solar panels and a battery for last 2 yrs.
@ermine is right, 3 months of peak winter, we still get 50% of house requirements from grid. Almost 100% solar for the other 9 months a yr. Still a 75-80% inflation hedge is great. 2 yrs ago when electricity was at 13p/kW all my friends correctly pointed out that my payback period was over a decade. I thought given 20 yrs of inflation, things will work out financially speaking. Little did I know, two yrs later, we’ll have 34p/kW and the payback would be reduced to 4-5 yrs which makes it almost a great commercial success. More luck than judgement on that inflation genie being released from the bottle so soon after my installation.
I invested in renewable trusts (solar and wind) that yield north of 6% to offset the remaining 25%.
Overall roughly £20k investment in reducing my bills and offsetting the rest are paying good dividends, literally and figuratively.
@Seeking Fire
Yes, my point was that the market price is X, so on average that is what someone must pay.
In my “scheme”, which is a much grander title than it deserves, all “standard” tariff power users would effectively subsidise those on the Social Tariff. No direct government money. Perhaps a better way would be to provide the tariff for a limited amount of gas/electric. More details, but sometimes we need to work through the details first (I’m looking at you, Brexit).
Yes this is redistribution, but sometimes that is the right answer in the moment. I fully accept your point regarding “temporary” solutions (Barnett formula anyone?), but that doesn’t make it the wrong thing to do now.
Any better ideas? Because we need some practical ways forward before winter. For the first time since the Poll Tax riots, which I experienced first hand, I’m genuinely concerned that this issue will rend the fabric of our society. Sorry if that sounds melodramatic, but to quote Mr. Ulyanov, “What is to be done?”
@ballard
Yes, the live link between current salary and a legacy scheme is the edge case I was trying to describe, but you have put it much more eloquently.
I think if you are formally deferred then there is no PIA implication.
@Simon — I don’t think you’re being melodramatic. The UK is riven by disparities between what we used to call classes and might now better call income/power groups (though it still amounts to much the same thing, especially at the top, with decreasing social mobility) and we saw from the Brexit/Referendum disaster how this can be manipulated and harnessed.
Here’s a very recent FT graph that shows the gap quite vividly in the case of cost of living increases from rising energy prices for the richest versus the poorest 20% of a population.
In the UK these groups are miles apart as to how badly the poorest 20% are affected:
https://twitter.com/PlanMaestro/status/1558865956922953731
@Simon. “I’m genuinely concerned that this issue will rend the fabric of our society. ”
So why does society keep voting for the Tories then? You reap what you sow.
Clearly the very bottom of society needs protecting temporarily from the worst impact of cost of living increases. Other countries have simply capped people’s bills at a certain % increase YoY (say 5%). Or capped units prices at a certain level, up to a specific usage, and then you pay full market rate. Others are providing major handouts via their equivalent of Universal credit. There are plenty of options available for targetted relief which other countries in Europe seem very able to execute.
We cannot, however, blame energy producers for making windfall gains. They took the pain when oil was sub $20 and we took the gain. Now it’s reversed. That’s how capitalism works. The retail energy providers got it wrong so they go bust. Fine. Most consumers have to pay through the nose to keep the lights on. Fine. We have savings to pay for these sorts of occurences (and currently UK households more savings than ever thanks to COVID). These energy prices won’t last forever: the market will ensure that.
The bottomline though is that this cost has to come out of either general taxation or more Gilt issuance. That’s why it utterly bonkers that the Tories want to give me an energy subsidy of £400, even more bonkers that Truss wants to cut my NI (£50k+ for me). Then again she accused British workers of laziness and lagging behind their Asian counterparts in Brittania Unchained, so frankly most of you are stuffed with her as PM. Thanks for voting Tory though. Very charitable that nearly half of you decided to vote for the top 1% so consistently over the last 12 years. Cheers.
@Simon #59 > all “standard” tariff power users would effectively subsidise those on the Social Tariff.
I was under the impression that this already happens. The outrageous increase in the standing charge is carrying all the people who played the system and their providers went bust and they were bailed out rather than losing their DD deposits. If I buy something from a company that looks too good to be true and they go bust I am prepared to take the hit. Either nationalise the whole bloody lot or have it as a market, but with market risks – I never switched to companies that were on the bottom 10% of MSE’s cheap energy club ratings for service but I am paying for those that did and found out it was too good to be true.
I am specifically and heavily targeting dropping electricity usage precisely to get these off my back. I can live with taxation redistributing, but this really jars me off. (for the record despite being a retiree I do pay income tax).
It will lead to perverse incentives. Solar panels for electricity on a domestic basis (as opposed to district or larger) which is a little bit barmy compared to allocating that capital to larger scale operations. I will not use a heat pump because this extra cost load on electricity trashes the nominal efficiency to a large extent, and the prospect of carrying more of this in future. In theory heat pumps are good from a green POV though I struggle to see how that can be the case given the 2/3 non-green component of power generation, but perhaps one day.
I must admit to being perplexed as to why so many voters think they are rich. The party that does the minimum it can get away with for the poor ends up with the most votes. Its been a clever scam selling off stuff the poor already own to the rich be that council houses or water, gas, electricity, trains, BP, BT etc. Its a remarkable play that quite frankly is a masterstroke.
Renewable, small scale generation might one day make up a big part of domestic electric demand – but that only makes up about 20% of UK power use. Most people cannot heat their home effectively with just electricity, let alone meeting the needs of industry and transport. Meanwhile the scientists expectation of temp increase is 1% or so average globally – and looking at the data that seems to be appearing more as warmer winters than much hotter summers. Even the UK could cope with that. You can be sceptical of alarmism, and of govt subsidies for sweetheart projects, massive Li batteries in houses, digging up all the current infrastructure etc, without being ‘A DENIER!’. The green movement could do with removing its religious elements, where everything bad is because of CO2, and the whole of society and the economy needs to be smashed up and rebuilt for ‘justice’ – it ain’t helping.
@ ermine & ZXSpectrum
I agree with what you both say and have the following thoughts:
1. As you say, the eye watering standing charge increase is bailing out those who used inadequately hedged power retail companies, not the “vulnerable”, although the two groups may overlap. In my view it was principally due to a combination of a failure in regulation (inadequate stress testing) and policy (unexpected consequences of the price cap). Is your view that those who were with those suppliers should not receive the benefit of the price cap and be exposed to full market prices? Otherwise the cost must be “socialised” somehow.
2. So what should be done? In my view we need a short term policy to get us through winter without excess hardship and deaths. I’ve proposed a solution, as has SKS, and you are welcome to challenge and criticise these. But ultimately we have to do something, even if that something is “nothing” as per apparent current Tory policy. The problem doesn’t go away if we all say we don’t like any of the proposed solutions.
3. In terms of where we were a year or two back with average gas & electric annual bills of £1200, this was ludicrously cheap in my view. You are getting all the heat and power you need for a whole house (not per person) for £3/day, much less than the price of a coffee shop coffee or pint of beer per day. Still tough for those on very low incomes, but for the vast majority it was a fantastic deal.
4. Final point to ZX, the Conservatives, especially in their current BluKip guise, keep getting in power because of FPTP and support of between 30 and 40 percent of the voting public. They do not have majority support for most of their policies. But that’s a whole other debate.
As per why people vote Tory even down the scale, bear in mind that all it takes for tax cuts to win is for you to not be on universal credit – there would be extreme beneficiaries who don’t need it, but that’s not the median. If free markets are generally more efficient, that extra efficiency compounds over many years to make us a country that people want to migrate to – capitalism is a long term thing, you can make short term gains like price controls but ultimately there would be supply problems.
Also a fair few people down the lower end of income are annoyed with not being much better off for working, competing for the same rental flats – there needs to be a material difference between working and not working, and if it’s not plausible to elevate the working class (which’d make us uncompetitive) they would happily downgrade the benefits class. Not means testing the £400 means essentially not adding extra tax to work, and if the rich do get more they can just reinvest – which helps supply chains.
Furthermore welfare undermines the role of breadwinner to fathers, they aren’t needed so much if the state will fill in for them at the same lifestyle, so they are uniquely under more pressure to prove their value, therefore more likely to want to undermine benefits and vote Tory
That’s how it is…
Very informative thread on electricity + but the underlying feeling is that not enough will ever be done with blame allocated to the usual culprits
Rather reminiscent of the Long Covid situation which is real but insignificant to many people who are having to cope with surviving from day to day and winter is not here yet!
A child of mine high up in the Home Office stuffed with very clever officials from Oxford,Cambridge etc remarked that these officials have no idea about how ordinary people live-constantly generating clever ideas that are not practical is a serious disconnect
I don’t presume to have the answers but sadly our current crop of leaders seem equally bereft-not a happy situation for any of us
xxd09
All the global warming chitty chat seems to neglect the crucial role of ocean currents on climate. When the N American icesheet melted it switched off the gulf stream and there were icebergs off Portugal. Although I won’t be around to see it, global warming might put us on an equal footing with somewhere at an equal lattitude, eg Hudson Bay.
However, any change in agricultural conditions will lead to massive economic disruption so I reckon the early danger is from social unrest and wars.
Grid connection (return surplus generation to the grid and get paid for it) is surely a simpler option over maintaining a battery system in a lot of domestic set ups.
A tangential idea is the option of storing surplus energy inter-seasonally as heat – such as in the Finnish ‘sand battery’ which charges up a silo of sand to ~500 deg C by resistive heating using surplus solar electricity. Short term thermal (hot water) storage is commonplace, why not longer term.
https://www.bbc.co.uk/news/science-environment-61996520