In last week's post on energy policy, I skipped over the effect of manufacturing efficiencies. If an information-intensive technology can be manufactured in a way that reaps large economies of scale, then the know-how used to create it can still be very cheap on a per unit basis.
Exhibit A for this effect is the integrated circuit industry. Each individual transistor is a small masterpiece of engineering. The intellectual property contained in a few square inches of silicon is enormous, but the industry spreads out the cost by making billions of them. Thin film solar manufacturers believe that manufacturing efficiency will allow them to reach a competitive price point. That would be very good news for me, my clients, and the world as a whole.
But still not necessarily for job creation.
The disconnect between information content and job creation is explored in more detail in this recent post at fivethirtyeight.com, analyzing the decline of manufacturing jobs in the US economy. It isn't due to "evil corporations shipping American manufacturing overseas." Until the start of the recent recession, US manufacturing output was at an all time high. Rather, it's due to massive improvements in productivity, which in this context means replacing humans with automation of various kinds.
If solar becomes cost competitive it will be through massive productivity improvements, achieved in part by automating every step that can be automated.
Still, merely looking at the need for productivity improvements does undervalue the job creation opportunity. Even if the number of jobs per GW goes down -- which I think is not only likely, but necessary -- the total number of jobs will still go up as the market size increases. The current world solar market is about 6 GW per year, but the world's total electricity consumption is in excess of 17 trillion kWh. That's a whole lot of room for growth.
Unfortunately, that also leaves us back where we started. Promoting use of a product through subsidies is not usually a good way to make the manufacturing of that product more efficient. The government can improve manufacturing -- for example by investing in research and development through organizations like NIST and NREL -- or it can create jobs, but it isn't really good at doing both at once.
Disclaimer: Though my past and present clients may like this post better, my opinions are still mine alone.
Sunday, February 28, 2010
Monday, February 22, 2010
For best policy, first define the goal
Is the goal of energy policy to reduce the costs energy imposes on the US economy and/or the planet, or to create jobs?
As one of my favorite energy-oriented sites points out, the two goals don't necessarily have much to do with each other.
Thin film solar technology, for example, contains a lot of intellectual property. Lots of engineering expertise is required to build the deposition systems, optimize the processes, and keep the whole operation running. Add the skilled electricians who actually build solar farms and connect them to the grid, and you get a lot of high-skill jobs. You also get electricity that is substantially more expensive than that generated by plain old boring low-tech fossil fuel plants.
But if your goal is to reduce the world's (or America's) consumption of fossil fuels and generation of greenhouse gases, whatever alternative technology you pick needs to be as inexpensive as possible. Ideally, it should be simple enough for illiterate subsistence farmers to implement using locally available materials, perhaps with guidance from a handful of engineers.
Not that there's anything wrong with green jobs. I have one myself, since most of my current clients are in the solar space. And certainly the emergence of a renewable energy sector will benefit the communities where those jobs reside.
But the assumption that clean energy will both prevent climate change and revitalize the US manufacturing sector doesn't stand up to close examination. Energy is a commodity product, and as such will always tend to migrate to the lowest cost technologies and least expensive producers. The fewer high-skill manufacturing jobs an energy technology requires, the more likely it is to actually succeed in shifting the world's energy mix.
Disclaimer: My opinions are my own, and do not necessarily represent the views of any particular past or present client.
As one of my favorite energy-oriented sites points out, the two goals don't necessarily have much to do with each other.
Thin film solar technology, for example, contains a lot of intellectual property. Lots of engineering expertise is required to build the deposition systems, optimize the processes, and keep the whole operation running. Add the skilled electricians who actually build solar farms and connect them to the grid, and you get a lot of high-skill jobs. You also get electricity that is substantially more expensive than that generated by plain old boring low-tech fossil fuel plants.
But if your goal is to reduce the world's (or America's) consumption of fossil fuels and generation of greenhouse gases, whatever alternative technology you pick needs to be as inexpensive as possible. Ideally, it should be simple enough for illiterate subsistence farmers to implement using locally available materials, perhaps with guidance from a handful of engineers.
Not that there's anything wrong with green jobs. I have one myself, since most of my current clients are in the solar space. And certainly the emergence of a renewable energy sector will benefit the communities where those jobs reside.
But the assumption that clean energy will both prevent climate change and revitalize the US manufacturing sector doesn't stand up to close examination. Energy is a commodity product, and as such will always tend to migrate to the lowest cost technologies and least expensive producers. The fewer high-skill manufacturing jobs an energy technology requires, the more likely it is to actually succeed in shifting the world's energy mix.
Disclaimer: My opinions are my own, and do not necessarily represent the views of any particular past or present client.
Thursday, February 18, 2010
Let the good times roll?
How to decide if a blog entry is worth writing: you have more to say than will fit in a 140 character Twitter post. (For those interested, my Twitter ID is kewms.)
In this case, I'm celebrating the end of the recession. North American semiconductor equipment manufacturers booked more than a billion dollars in orders in January, for the first time since May, 2008. Though still a pretty weak number in historical terms, that probably does mean people are buying actual equipment, as opposed to consumables, service contracts, and so forth.
(In the depths of the recession, people joked that even a single package of O-rings would be enough to move the book-to-bill number.)
Equipment purchases are good news for a couple of reasons. First, they usually mean that the purchasing fab is running at 80-90% of capacity and the demand outlook is positive. Second, they mean that the customer is able to get financing on terms it considers reasonable.
In this case, I'm celebrating the end of the recession. North American semiconductor equipment manufacturers booked more than a billion dollars in orders in January, for the first time since May, 2008. Though still a pretty weak number in historical terms, that probably does mean people are buying actual equipment, as opposed to consumables, service contracts, and so forth.
(In the depths of the recession, people joked that even a single package of O-rings would be enough to move the book-to-bill number.)
Equipment purchases are good news for a couple of reasons. First, they usually mean that the purchasing fab is running at 80-90% of capacity and the demand outlook is positive. Second, they mean that the customer is able to get financing on terms it considers reasonable.
Wednesday, December 9, 2009
Dubai update
Just a quick update on my post on the Dubai World debt restructuring. A spokesman for Dubai Silicon Oasis says that DSO is not part of Dubai World and will not be directly affected. The indirect effects are anyone's guess.
Be careful what you wish for: telecom edition
Oh, this is rich.
First, the iPhone launches, with AT&T as its only US provider, and an unlimited data plan as the standard package.
Because the iPhone is popular, users flock to AT&T. Because internet access from the iPhone is easy, people do it, a lot.
AT&T's network staggers under the load, leading to dropped calls and poor performance.
AT&T's solution? "Some form of usage-based pricing for data is inevitable," according to the Associated Press.
What I want to know is why anyone was surprised by this. The history of the internet -- the history of computing -- tells us that if you make access easier, people will do more of it. And now AT&T is shocked, simply shocked, that people are actually using all those bandwidth intensive links that Apple so helpfully provides.
Of course AT&T's dilemma is real. They need to improve service, and the money to do that has to come from somewhere. But capping usage seems like such a late-1990s way to go about it. Given the bandwidth demands of the Apple Store, I wonder what Apple will have to say about this.
(Link by way of the Atlantic business channel.)
First, the iPhone launches, with AT&T as its only US provider, and an unlimited data plan as the standard package.
Because the iPhone is popular, users flock to AT&T. Because internet access from the iPhone is easy, people do it, a lot.
AT&T's network staggers under the load, leading to dropped calls and poor performance.
AT&T's solution? "Some form of usage-based pricing for data is inevitable," according to the Associated Press.
What I want to know is why anyone was surprised by this. The history of the internet -- the history of computing -- tells us that if you make access easier, people will do more of it. And now AT&T is shocked, simply shocked, that people are actually using all those bandwidth intensive links that Apple so helpfully provides.
Of course AT&T's dilemma is real. They need to improve service, and the money to do that has to come from somewhere. But capping usage seems like such a late-1990s way to go about it. Given the bandwidth demands of the Apple Store, I wonder what Apple will have to say about this.
(Link by way of the Atlantic business channel.)
Saturday, November 28, 2009
Yes, the Middle East matters to IC makers
Interesting... The Advanced Technology Investment Company launched GlobalFoundries, a joint venture with AMD, earlier this year. Earlier this month, it agreed to purchase Chartered Semiconductor, thereby becoming a major player in the foundry market. ATIC is owned by the government of Abu Dhabi, and has said it plans to build manufacturing facilities in Dubai Silicon Oasis.
Meanwhile, Dubai World, the Dubai government's largest investment vehicle, recently announced it would seek a six-month hold on debt payments as part of a restructuring, the same day it raised US$5 billion from Abu Dhabi banks. Both Dubai and Abu Dhabi are part of the United Arab Emirates, and the federal UAE government is under pressure to provide more support for Dubai World, which it may or may not do. The UAE has been hit hard by declines in the price of oil. More generally, the global economic downturn has put a lot of pressure on government finances around the world, and the Dubai World restructuring shows that support for underperforming investments can't be assumed. (Best coverage of the Dubai World restructuring is at the Wall Street Journal. Subscription required.)
I don't know how the problems at Dubai World will affect ATIC or, for that matter, Dubai Silicon Oasis. I've sent out some queries, but don't expect a response over the weekend. The situation definitely bears watching, though. The semiconductor industry rewards patient capital, but global conditions are making patience difficult.
Meanwhile, Dubai World, the Dubai government's largest investment vehicle, recently announced it would seek a six-month hold on debt payments as part of a restructuring, the same day it raised US$5 billion from Abu Dhabi banks. Both Dubai and Abu Dhabi are part of the United Arab Emirates, and the federal UAE government is under pressure to provide more support for Dubai World, which it may or may not do. The UAE has been hit hard by declines in the price of oil. More generally, the global economic downturn has put a lot of pressure on government finances around the world, and the Dubai World restructuring shows that support for underperforming investments can't be assumed. (Best coverage of the Dubai World restructuring is at the Wall Street Journal. Subscription required.)
I don't know how the problems at Dubai World will affect ATIC or, for that matter, Dubai Silicon Oasis. I've sent out some queries, but don't expect a response over the weekend. The situation definitely bears watching, though. The semiconductor industry rewards patient capital, but global conditions are making patience difficult.
Thursday, October 29, 2009
It won't be zombies next time
Yes, a blog post! Believe me, I'm shocked too. Though this year has been surprisingly good, given the economic situation, it's had me working on several larger, multi-month projects. That's taken me out of the day-to-day news flow to some extent.
But I did notice this, and it's well worth passing on. Atlantic Business Channel editor Daniel Indiviglio has broken down the recently released proposal on financial regulation and systemic risk. How do regulators deal with institutions that are too big too fail? Indiviglio's analysis is long -- I've linked to the last of eight parts, which summarizes -- but readable for those of us who aren't economic policy wonks.
At the same time, I can't help but think of an old story in which an adventurer complains that he knows all about zombies now, so of course it won't be zombies that attack him next time. Booms and busts appear to be inherent in markets, dating back at least to the 17th century Dutch tulip mania. The desire to build bigger and bigger institutions and accumulate more and more assets is as old as humanity. Any regulatory scheme that preserves the essential dynamism of markets is likely to contain the seeds of its own failure. The critical question may not be whether it will work, but what will contain the damage when it fails.
But I did notice this, and it's well worth passing on. Atlantic Business Channel editor Daniel Indiviglio has broken down the recently released proposal on financial regulation and systemic risk. How do regulators deal with institutions that are too big too fail? Indiviglio's analysis is long -- I've linked to the last of eight parts, which summarizes -- but readable for those of us who aren't economic policy wonks.
At the same time, I can't help but think of an old story in which an adventurer complains that he knows all about zombies now, so of course it won't be zombies that attack him next time. Booms and busts appear to be inherent in markets, dating back at least to the 17th century Dutch tulip mania. The desire to build bigger and bigger institutions and accumulate more and more assets is as old as humanity. Any regulatory scheme that preserves the essential dynamism of markets is likely to contain the seeds of its own failure. The critical question may not be whether it will work, but what will contain the damage when it fails.
Subscribe to:
Posts (Atom)
Posts
