Solar Energy’s Hidden Costs

One of the adages that we have all grown up with is “start wrong, end wrong”. It is as true for a building as it is with life and certainly with the development of public policies. It is obvious to most of us that if the foundation of a structure is not sound the building itself will be structurally unsound and, over time, become dangerous to those that live or work in it. This will either cause the building to be condemned and demolished or may result in a catastrophic collapse resulting in loss of life and human suffering.

There are many external factors that may impact upon a poorly designed or constructed building. Right away our minds leap to the more obvious ones such as hurricanes or earthquakes but there are many other factors such as slow erosion of subsoil or unforeseen adjacent construction that causes a disequilibrium and ultimately failure in the supporting structure.

In recent years there have been some dramatic examples of buildings collapsing because they started wrong. Public policies are no different but not as obvious. When they collapse there is no dramatic crashing of masonry and steel and no cloud of dust with ambulance sirens wailing in the distance. Instead there is a drain on the public purse and a decline in our quality of life. All too often we start wrong to achieve what is seen as a laudable objective and this is where expediency and mendicancy plays an insidious role.

We have a problem, a solution is offered with funding and strings attached, we need the foreign exchange inflow that would arise from the external funding and we swallow the bait. The hook is set and then comes the ongoing cost of maintaining the project and there is no certainty that we have solved the initial problem.

That scenario is played out over and over again and one old example that comes to mind is the solar powered air conditioning system installed many years ago at the Ministry of Agriculture. Today it is the taxpayer funded installation of solar electrical generating systems.

Our problem is the escalating cost of energy and the outflow of foreign exchange to meet the cost of generating that energy. The foreign exchange component is a combination of the capital cost of the generating and distribution equipment and the oil that is presently imported as fuel for conversion into electrical energy or to be used in the combustion engines of cars, trucks, busses, farm equipment and fishing boats. Global oil production has a finite lifetime and has become increasingly expensive to recover from deep wells and depleted reservoirs. It is also subject to geopolitical price shocks. Solar energy on the other hand is free. But there comes the rub. How do we leap from an increasingly scarce resource and escalating prices to free energy?

If government has to subsidize the installation of solar generating systems it must be evident that the economics of transitioning from oil based generation to solar generation does not look appealing to the market place. The idea seems good but the technology has not yet been developed to create the efficiencies that would make economic sense. There still is no free lunch.

In steps the external funding agency that would provide soft loans or grants or any combination thereof. It would be an immediate infusion of foreign exchange.  This then becomes the driver of a policy decision that would put the factories to work in China, the U.S., or Europe by providing a market for solar panels, inverters and batteries at our expense while transferring the burden of future investment in the generation of energy to the businesses and householders of Barbados. A short term gain in foreign exchange is soon replaced by a long term hard currency drain as the capital cost of energy generation escalates and becomes increasingly fragmented, difficult to manage and unreliable.

In addition to this, the electric company will still be required to have the installed capacity to provide electric power to meet the demands of the island thus the national capital cost of generating electricity will be increased as more and more redundant systems are installed.

A switch from Oil to natural gas seems to be the better solution in the near to medium term.

phillip.goddard@braggadax.com

Raise the Bar for Success

As the world’s financial markets implode around us is seems as though we are caught like a hare rabbit in a spotlight, transfixed in uncertainty and with no clear path to safety. The denial about our true situation is highlighted by the illegal intrusion of the Central bank in the release of statistical information by the institution of government that is legally responsible for collecting data and presenting it to the public, the Government Statistical Department.

First, the Central Bank influenced the Statistical Department to reduce the extent of the decline of nominal GDP. Next, they applied a deflator that was so constructed as to show a marginal increase in real GDP. The deflator used for the period under review assumed that though retail prices increased 7%, wholesale prices actually declined. This assumption would mean that retailers were increasing profit margins in a highly competitive market where consumers were increasingly price conscious because disposable household income had been savaged by tax increases and removal of tax allowances. The upshot was that the Central Bank assertion of marginal growth in the economy did not square with the evidence of our own eyes.

It is impossible to develop and implement a strategy to buttress ourselves against the economic tsunami that continues to inundate us if we continue to deny the evidence of a decline in the Barbadian economy and rising unemployment. Instead we follow the paths of expediency as we flout the law by appointing people to positions without the legislative authority to do so. We champion a lowering of standards when they become inconvenient and treat these actions as national achievements to be proud of.

 Barbados must differentiate itself in the market place through a continued process of renewal and improvement of standards in all areas of human activity. The nation needs to be challenged to do better day by day and year by year. Barbadians want to succeed but they need to understand where we are going and the opportunities that lie ahead for them.

The hospitality industry is the largest sector of our economy and an increasing number of Barbadians are honing their expertise in many diverse areas of this business as they bring new skills to bear in this highly competitive arena. We have made significant improvements over the decades but there is yet much to be done. Barbados has to target the high end of the leisure market and this means developing a rich cultural and historical experience to simulate the intellect of our visitors and provide them with an experience that exceeds their expectations.

This can only be done by improving our standards and clearly articulating our objectives to get as many as possible to join this national effort. By applying ourselves, working both harder and smarter, improving our self discipline and treating time as a precious resource we can swim against the tide.

The best advertizing campaign is a satisfied customer and we need to improve our visitor feedback information to steadily raise the bar. We must provide the opportunity for expanded economic activity in the hospitality industry of Barbados as we strive to meet the changing needs of our visitors through entertainment, sports and cultural opportunities.

A clearly articulated goal of attracting and catering to visitors at the high end of the market, coupled with a new and specifically targeted promotional campaign that uses the most cost effective technological tools of communication would place us on the road to recovery, expand the revenues of the industry and set us on a sustained path of excellence.

We can achieve none of this if we flout the rule of law and play political games with the statistical data that is so critical for planning in both the public sector and the business community.

Leadership: the Critical Success Factor

It is in times of crisis that the true metal of men and women are tested.  When confronted with natural disasters, economic crisis, accidents or war it is the quality of leadership that usually results in beating the odds by motivating ordinary people to achieve incredible things.

As a consequence I have often wondered why more emphasis was not placed on developing the art of leadership in management and business schools or in the work place training curricula. Certainly it gets short shrift as we discuss the need for better management skills, improved organizational structures and enhanced infrastructure of equipment to achieve specific objectives of businesses, government departments or non-profit organizations.

We often get trapped into thinking that technical management skills of accounting, scheduling and material management are enough to do the job without paying attention to those leadership skills that weld people together into a team and fill them with enthusiasm to achieve beyond anyone’s expectations. Granted, this is a tall order in a society that seldom places the words “work” and “enthusiasm” in the same sentence, or where many are conditioned to reject taking responsibility for anything.

When economic conditions are favourable, hurricanes absent and warfare relegated to distant lands, good management and proven systems are enough to keep things on an even keel. True there are isolated incidents of crisis when flood, fire or accidents endanger life and limb and our fellow citizens display spontaneous acts of heroism and initiative to avert disaster. By their example they lead others to assist in rescue and other actions that benefit the whole community. These are tactical examples of leadership that demonstrate the innate leadership capacity of people from all walks of life and widely diverse educational backgrounds.

Strategic leadership encompasses much more. It provides a vision for a country or organization and mobilizes people to embrace that vision with an enthusiasm to achieve great things, often at significant personal sacrifice. Such leaders make the difference between victory and defeat in times of great national peril and in the face of seemingly insurmountable odds.

Such was the achievement of Sir Winston Churchill who rallied the British in the darkest days of the Second World War as they stood alone against Hitler after the collapse of France. The French generals advised their government that in three weeks England would have her neck wrung like a chicken. In an address to the Canadian Parliament more than a year later, Churchill was able to say, “Some chicken! Some neck!”.

Today we are not faced with a military threat, but with the threat of great financial peril as the global economy gyrates through its greatest period of turmoil in living memory. We first chose to ignore the threat and now we are bewildered by it. It is clear that we cannot continue as we have in the past but there is no articulated vision that would point us in the direction of future success. There has been an abject failure of leadership these past few years as we stumble from one crisis to another.

It is time for the government to grasp the nettle of leadership, level with the people of Barbados about our true state of affairs, and chart a path to economic recovery that would require a cultural change in the attitude to work, productivity, discipline and self reliance. It is not easy, but then again nothing worth doing is easy.

Certainly it is not a time for government departments or agencies to be in a public dispute over critical statistics relating to economic growth or decline, as well as rising unemployment levels. This only sends signals of confusion and denial and a clear sign that solutions are beyond the grasp of those at the helm.

phillip.goddard@braggadax.com

The Scourge of Islamic Extremists and Jihad

Today, we reflect on the tenth anniversary of a direct attack on the United States by fanatical followers of Osama Bin Laden, the leader of Al Qaeda. We should never forget the grim reality of the savagery that extinguished nearly three thousand lives and injured more than six thousand men, women and children. An act of hatred and single minded violence aimed at the United States and claiming victims from more than 90 countries around the globe. It was not just the United States that was attacked but all pluralistic democratic countries around the world.

The objective of this carnage was the establishment of a global Islamic Caliphate that would impose a rigorous theocratic dictatorship under a harsh interpretation of Sharia Law. Al Qaeda seeks to achieve its objectives with a total disregard for the value of human life and a single minded willingness to obliterate all that might stand in its way.

The attack on New York and Washington D.C. on 9/11 was preceded by a continuing series of attacks carried out by Al Qaeda and other militant Islamic organizations. It included an earlier attack on the World Trade Center in New York City, bombing U.S. Embassies in Dar el Salaam and Nairobi, with hundreds of innocent civilians slaughtered and thousands wounded. It was followed by bombings across Europe as airport terminal buildings, trains, busses and subway systems were attacked as well as targets in Southeast Asia and India.

After the destruction of the World Trade Center twin towers the response of the United States and its allies was swift and unrelenting with an invasion of Afghanistan and Iraq and special military operations elsewhere in the Middle East and South East Asia all aimed at disrupting Al Qaeda’s leadership and organizational structure.

At the same time enhanced security and surveillance measures were introduce to prevent terrorist attacks and as the struggle has morphed into new threats new counter measure techniques were developed. As a result our lives have changed forever with the advent of a new form of warfare waged by a dedicated group of Islamists with no fixed place of abode but with one objective to destroy America’s way of life and its democratic system of government, its culture of tolerance and a respect for the value of human life and dignity. They would replace it with an austere and ruthless totalitarian theocracy that celebrates death; relegates women to the status of second class citizens and denies them an education and equal legal status with men.

While America is at the head of the food chain for these Islamic zealots, we in Barbados and the rest of the Caribbean should be under no illusion that we are not on the menu as well. The assault on Bali should have clarified that for us. We should not believe that because of our small size we will have escaped their notice.

Though the success in the United States is measured by the lack of a major assault on the American homeland since the destruction of the Twin Towers, there have been many close calls such as the planned simultaneous in flight destruction of ten airliners over the Atlantic that was foiled by British law enforcement units.

The war, and war it is, has been a drawn out affair and fatigue seems to have set in as troops are being withdrawn from the battle fields of Iraq and Afghanistan. There is a growing reluctance to define the enemy that precipitated the war and convoluted euphemisms are being employed to avoid describing the true nature of the enemy that would destroy us and our way of life.

If we are to win and ultimately succeed in preserving the freedoms and the rule of law that we enjoy we must clearly understand the enemy and its agenda. It is time to call a spade the proverbial shovel and resist this new form of aggression with grit and determination. If we resile from identifying the enemy that attacks us, the path to victory becomes more difficult.

phillip.goddard@braggadax.com

Calories Food and Energy

What do Fidel Castro and a prominent leader of the world’s largest agro industry business have in common? It is the belief that politically motivated policies supporting the rush to biofuel production has caused excessive food inflation and starvation in the world’s poorest countries. In middle income countries such as Barbados it has placed pressure on families who spend a large percentage of their income on food and reducing their quality of life.

Fidel Castro has long criticized the United States for its use of grain in the production of ethanol and the impact that it has on food scarcity and price escalation. Now the chairman of Nestle Mr. Peter Brabeck-Letmathe has joined the former President of Communist Cuba in decrying the ever expanding production of biofuels. He was critical of policy makers’ lack of understanding of the linkage between food and energy – the calorie.

The energy stored in a bushel of corn can fuel a car or feed a person. Increasingly, because of political decisions in America, Europe and Brazil, crops formerly grown for food or livestock feed, are being grown for biofuel production. This year it is estimated that America will grow more corn for biofuel than for feed and food while in Europe 50 percent of rapeseed production will find its way into the fuel tanks of trucks and cars.

In a country such as the United States where less than ten percent of disposable income is spent at the supermarket, the effect of food inflation is marginal, in Barbados where the supermarket bill is between 40 and 60 percent of disposable income for many Barbadians, the increase in the price of food is felt much more keenly. In countries where food accounts for 80% or more of disposable income the increase in food prices result in malnutrition, starvation and civil insurrection. What we refer to as the Arab spring that has engulfed Tunisia, Egypt, Libya and Syria essentially started as a protest against significant increases in the cost of food, a factor that has proved to be a powerful trigger for protest and riot.

The energy market is 20 times the size of the food market in terms of calories. This means that the stated goals of some of today’s political leaders who want to achieve a biofuel component of 20% of the energy market would mean tripling food crop output without adding anything to the food consumed by people. It seems as though they just have not done the math but then again there is little new in this.

The bottom line is that the economics of biofuels is seriously flawed and demonstrates the massive distortions that occur as a result of government’s intervention in the marketplace through subsidies. The human tragedy that follows is inexcusable.

If we want to balance the food production to human need we should articulate a policy of no food for fuel. This should be our local, regional and international position in achieving stability in food production for mankind and an assured affordability of the basic food requirements.

phillip.goddard@braggadax.com

Sugar and a Holistic Approach to Agriculture

Industrial production is a globally competitive economic activity that relies on a multiplicity of factors to produce a product that is competitive in price and quality. The inputs are raw materials, labour, energy and the cost of capital.  The sugarcane industry in Barbados is no exception. With the lack of economies of scale, high cost of energy and labour and other structural inefficiencies there is no escaping the fact that Barbados is one of the highest cost producers of sugarcane and sugar in the world.

By starting with a high cost raw material, sugarcane grown in Barbados, any finished product be it sugar, molasses, bio-fuels or any esoteric byproduct will also be high cost and uncompetitive. We cannot escape the underlying high cost structure of sugarcane cultivation and transportation that cascades through the production cycle to produce expensive finished products. Added to this, is the excessive manpower cost of production in the two remaining sugar factories that places Bajan sugar in the unenviable position of being the most expensive sugar in the world.

Are we now to believe that by some alchemy we can produce cost competitive byproducts from sugar cane by investing $200 million in plant and equipment? To make such a suggestion requires a total suspension of logic and rational thought.

If sugar cane cultivation is to continue in Barbados we have to recognize that price support or subsidy for sugarcane will be necessary on a continuing basis. The level of this subsidy has skyrocketed in recent years and has placed an enormous burden on the government’s finances; a burden that has been exacerbated by the current financial crisis and the contraction of the economy.

The sugar industry, however, cannot be seen in isolation from the rest of the farming community that produces a wide range of food products and livestock. There is also an esthetic value in the continued cultivation of sugarcane that pays dividends for our hospitality industry and also impacts upon our sense of order and belonging to a productive society. There is not one of us that does not view with dismay a tract of land that has been left to run wild with bush, vines and small trees. It sends a message of abandonment, a sense of waste and a loss of hope that is an undeniable cost to the community.

Given the urgent need for us to improve our food security and to strengthen our agricultural productivity we must design a framework that encourages investment and attracts people of technical and managerial ability through the opportunity for financial reward that is equal to other sectors of the economy. In so doing, we should provide meaningful and accountable support for all sectors of the agricultural community that discourages abuse of the system.

I do not advocate writing a blank cheque with a never ending escalation of cost, but a hard headed approach to supporting farming in Barbados with a range of initiatives that take into account a full cost benefit analysis to the society and the development of our economy. In so doing we must deal with specifics and empirical evidence and not speculative dreaming about ephemeral silver bullets and wildly improbable estimates of productivity increases.

It goes without saying that a new multi-sector approach to reducing crop and livestock theft must be put in place. We must ensure that the meat sold in Cheapside has not been stolen from a farmer and vigorously address the scourge of criminal activity aimed at our farming community. Without such an initiative financial support for farming will fail.

It is not a time to dust off old narrowly focused remedies that did not work or encouraged corruption; it is not a time for vague expressions of support and plasters on sores. A fresh approach is needed with specific goals and actions to be taken that provide an interlocking support structure for the whole food production community. Above all there is a need for leadership to drive the process and to generate a buy in from the general public in support of stimulus for the farmers of Barbados.

phillip.goddard@braggadax.com

Climate Change Revisited

I have always tried to keep an open mind on the climate change debate as it has become increasingly politicized and seized upon as the cause célèbre of our times by those that advocate global redistribution of wealth. The story line thus far is that man is the primary cause of climate change and we need to act with great urgency to reduce carbon dioxide emissions thus reversing the primary causes of global warming. The greatest evil in this story book is coal that produces more energy at a lower cost than any other fuel in the United States, China and India. This is followed by oil and to a much lesser extent natural gas. The bottom line is that all hydrocarbon based fuel should be avoided to save the planet.

From the adoption of the Kyoto Protocol in 1997 to the planned Climate Change Conference in Panama this coming October there has been a series of conferences and a plethora of solutions to reverse man’s impact on the global climate. Many of these solutions call for the developed world to provide funding in one way or another for the developing world to reduce carbon emissions or to save rain forests and encourage reforestation to absorb CO2 emissions.

There is much at stake in the global climate change business. Many have hitched their wagon to this train for either political gain or economic enrichment or both. The science supporting climate change theories and the empirical evidence has been patchy and in some instances contradictory. In extreme cases some of the data has been distorted to prove a predetermined conclusion. All of this has created a cacophony of competing opinions about the reality of both climate change and its causes.

In an effort to keep up with the issue I have read countless books and articles on the subject and engaged in long discussions with petroleum industry experts, oceanographers and climatologists who have long been engaged in research and analysis of climate change data. As a result I had concluded that the problem was so large and complex that we were just nibbling at the edge of the pie of knowledge and reaching conclusions with insufficient data. Having done so, we are in the process of applying corrective action that could be truly counterproductive and play havoc with the global economy.

Most recently, NASA has released conclusions of a study utilizing data collected by NASA’s Terra satellite between the years 2000 and 2011 and supported with data collected since 1985 from other satellites. It now appears that far less future global warming will occur than United Nations computer models have predicted, and supports prior studies indicating increases in atmospheric CO2 trap far less heat than alarmists have claimed. This is a triumph of real world data over that of computer modeled assumptions that have led to alarmist conclusions on which governments around the world have relied on to shape their policy decisions.


It will be interesting to see how the recent conclusions of NASA based on the actual evidence from multiple satellite sources over 25 years will affect the discussions in Panama and later on in the year in South Africa. But as Galileo discovered some time ago theological positions trumps real world evidence.

phillip.goddard@braggadax.com