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The consolidation of the offshore wind turbine manufacturers

Adwen, an offshore wind turbine manufacturer which is a subsidiary of Siemens Gamesa Renewable Energy (SGRE), just announced that it will be cutting its current workforce of 480 employees to just 220 employees by 2020. All development and sales of Adwen turbines will be halted, and the remaining staff will be focused on servicing the existing turbines in the field. The engineering staff that currently develops Adwen turbines will be incorporated into Siemens Gamesa.

With this announcement, the Adwen brand of turbines has been effectively terminated. It is the sad end to a promising company that used to be the second largest manufacturer in the world of offshore wind turbines with 18.2% of Europe’s installed offshore capacity at the end of 2015. Adwen’s announcement sounds the death knell for the innovative AD 5-135 turbine, which used a hybrid drivetrain that combined the lower cost of a geared drive with the lower maintenance of a direct drive. There is also no hope of ever reviving development of the Adwen AD 8-180, whose 88.4 meter blades were the longest in the world and its 10 meganewton-meter gearbox was the most powerful in the world. Despite the fact that Adwen had 2 GW of future orders on the books and probably could have survived as an independent company, its geared turbines competed too closely with the direct drive turbines (SG SG 8.0-167 DD, SWT-7.0-154 and SWT-6.0-154) that parent company Siemens Gamesa offers for the offshore market.

It is worth contemplating how few offshore wind turbine manufacturers still remain in the market. Back in 2011, the Siemens SWT-3.6-120, Vestas V112-3.0MW, BARD NV (5MW), REpower 5M, Areva M5000 and Hitachi/Fuji Suburu 80/2.0 were all in production, and there were public announcements about the future development of the MHI Sea Angel 7MW, Samsung S7.0-171, Alstom Haliade 150-6MW, Vestas V164, Siemens SWT-6.0-154, Enercon E-126 (6MW), XEMC Darwind XD115-5MW, Sinovel SL6000, Ming Yang SCD 6.5MW, BARD 6.5, AMSC WT5500FC, CSIC H151 (5MW), Daewoo 7MW, Gamesa G132-5000, Nordex N150 (6MW), GE 4.1-113, Goldwind 6MW and Clipper 10 MW Britannia for offshore use.

The offshore wind industry has changed dramatically since the heady days of 2011 when the sky seemed to be the limit for the offshore business. Vestas hit a financial crisis in 2012 and realized that it didn’t have the necessary resources in house to finish developing its V164, so it created a joint venture in 2013 with Mitsubishi Heavy Industries (MHI), which then axed its own Sea Angel turbine. Areva also decided that developing offshore turbines was too expensive to go it alone, so it created a offshore wind joint venture with Gamesa named Adwen in 2014. This short-lived JV came to an end in 2017 when Gamesa merged with Siemens. In order for Gamesa to be able to complete the merger, Gamesa bought up Areva’s stake in Adwen. GE tried twice to develop its own offshore turbines that never made it to market, before it bought up Alstom in 2016. These mergers have reduced seven offshore turbine manufacturers down to just three. The only remaining offshore wind turbine manufacturer from 2011  that hasn’t yet been merged is REpower, which was renamed as Senvion in 2014, but it is widely rumored to be looking for a partner in the offshore wind industry.

Almost all the other offshore turbines planned in 2011 never got financed or never made it past the testing of prototypes. The American turbine maker, Clipper Windpower, was hit hard by the 2008 economic crisis and was bought up by United Technologies (UT) in 2010, which killed its plan to build a gigantic 10MW offshore turbine in 2011 and then shut down all new turbine manufacturing in 2012, when UT decided to only focus on aerospace. When South Korea announced a plan in early 2011 to install 2.9 GW of offshore wind, Samsung, Daewoo, Hyundai, Doosan and STX all started developing offshore turbines. Samsung even created the largest turbine rotor in the world with 83.5 meter long blades. Then in 2014, it decided wind turbine manufacturing was a money pit and abruptly quit the market. All of its South Korean rivals also quit the wind business as well, except for Doosan which recently announced it would develop an 8MW offshore turbine. Currently only 38MW of offshore turbines have been installed off South Korean shores.

Despite the fact that offshore wind did grow dramatically in Europe, few European turbine manufacturers were able to take advantage of that growth. BARD went bankrupt in 2013, killing its planned BARD 6.5 turbine. Enercon produced its E-126 which at 7.5MW was the most powerful turbine in the world before the introduction of the V164, but Enercon gave up on the offshore market as being too risky for the Germany company, despite employing a direct drive technology that should have been a good fit for the offshore market. Nordex couldn’t find partners to help finance its N150, and has retreated from the offshore market as well.

Back in 2011, there were 6 manufacturers of offshore turbines (Siemens, Vestas, BARD, Areva, REpower and Hitachi/Fuji), plus another 18 companies (GE, Clipper, Samsung, Daewoo, STX, Hyundai, Doosan, MHI, Alstom, Gamesa, Nordex, Enercon, Goldwind, Ming Yang, CSIC, XMEC Darwind, Sinovel and Dongfang) had announced plans to enter the market. Almost none of those plans that looked so rosy in 2011 came to fruition. Looking at the cumulative market shared of offshore wind turbines by the end of 2017, it is striking how few of those companies with grand plans in 2011 hold any significant market share today.

Percent of cumulative global offshore wind turbine capacity at end of 2017:
Siemens Gamesa: 54%
MHI Vestas: 15%
Shanghai Electric (Sewind): 7%
Senvion: 7%
Adwen: 5%
Goldwind: 3%
Envision: 3%
CSIC: 1%
GE: 1%
Source: Calculated from data in the GWEC Global Wind 2017 Report

Siemens Gamesa has built or designed 66% of the world’s existing offshore wind turbine capacity if including its subdivision Adwen and the turbine designs that it licenses to Shanghai Electric (Sewind). It may seem surprising that Siemens Gamesa has so dominated the offshore market, when it equally shares the onshore market with Vestas, GE and Goldwind.

Source: Windpower Monthly (2017-10-02) Top ten turbine makers of 2017.

Siemens first pioneered offshore wind turbines back in 1991, but Vestas was taking most of the offshore market in the mid 2000’s, when offshore wind was just starting to emerge. It is worth examining why Siemens ended up beating Vestas in the offshore market as shown in the graph below of MW of new offshore turbines per year between 2000 and 2016:

 

Vestas effectively killed itself in the offshore market by using a gearbox that couldn’t stand up to the rigors of coastal winds. Rather than developing a new turbine, Vestas tried to repurpose its existing V90-3.0 onshore turbine for offshore usage. After installing 30 V90-3.0 turbines in the Kentish Flats wind farm in 2005, it had to replace all the gearboxes over the next 2 years and was forced to take the V90 off the market in 2007 until it reintroduced the turbine sporting a new gearbox developed with Hansen Transmissions. This new gearbox, however, proved little better. In May 2012, Vestas reported gearbox problems with 376 of the V90-3.0 turbines that it installed between 2009 and 2011. Questions were raised about the quality of Vestas’ turbines, when the end of the blade broke off a prototype of the V112-3.0 in 2010, which was being developed as the successor to the V90-3.0.

In contrast, Siemens had developed a reputation for good turbines with reliable gearboxes that had low maintenance costs. 96% of the turbines that Siemens installed in the US between 1983 and 1989 were still in operation in 2009. This reputation served it well in the nascent offshore market, where the increased strength of the winds made damage more likely and the high cost of access via boats and helicopters made maintenance more costly. Historically, the gearbox was the part of the wind turbine which was mostly like to fail, so Siemens turbines with their reliable gearboxes were deemed the safest bet by risk-adverse electric utilities and energy project developers.

The design of the high speed, 3 stage Winergy gearboxes and the squirrel-cage generators used in Siemens SWT-3.6-107 and SWT-3.6-120 was very conventional, so it is hard to say that Siemens’ geared turbines were significantly better than its competitors, but almost 10 GW of those two turbine models were installed. Siemens advertised its SWT-3.6-120 as “thoroughly tested, utterly reliable,” and the large number of its deployments created a snowball effect that made it hard for other turbine companies to compete with its reputation. Shanghai Electric (Sewind) chose to license Siemen’s SWT-3.6-120 turbine design because it was so well tested in the field. Because Siemens had so many orders for its offshore turbines, it was able to design its own special ships for installing turbines in coastal waters, which allow it to install a turbine in less than 24 hours.

While Siemens had a reliable design with good reputation and economies of scale in its favor, it mostly took the lion’s share of the offshore market because its competitors were suffering financial woes that restricted the needed R&D and marketing of their offshore turbines. Vestas was suffered through financial turmoil, which hindered its ability to deploy the V112 and delayed the development of the V164, so Vestas was stuck trying to sell the outdated V90 to the offshore market. REpower was also experiencing financial woes, which is why it was sold off to the Indian company Suzlon in 2007. Suzlon, however, had so highly indebted itself buying REpower and trying to increase its production capacity, that it was forced to sell off the company in 2015 in order to avoid bankruptcy. Areva was loosing millions of euros every year on its nuclear business and Gamesa was hit by the loss of renewable energy subsidies in Spain, so neither company had sufficient funds to properly invest in Adwen.

Siemens Gamesa probably won’t have such a commanding lead in the current generation of 5-9 MW turbines, as it did in the last generation of 3-4 MW turbines, but it is undoubtedly going to continue to grabbing the lion’s share of the market in Europe and Shanghai Electric has used its turbine design to grab 50% of the Chinese offshore market as well.

Shanghai Electric, Goldwind, Envision and CSIC have been relegated almost exclusively  to the Chinese market, although Envision and Goldwind have ambitions to become global players. With Adwen in the process of being phased out, there are currently only three competitive offshore turbine manufacturers outside of China. Senvion has limited reach, since it only has operations in 11 countries. Its 6.2M126 offshore turbine uses a high speed, 3 stage geared design from mid-2000’s which is outdated and considered less reliable than Siemens’ direct drive and MHI Vestas’ medium speed, 2 stage geared drive. For most of the world, the only real competitors in the offshore market are Siemens Gamesa and MHI Vestas.

It seems strange that so many companies have been driven out of the offshore market, considering the fact that the market size has quadrupled in six years, from under 1000 MW in 2011 to 4331 MW in 2017. With an exploding market, why were so many turbine manufacturers driven out of the offshore wind business and most of them forced to combine into larger companies in order to survive?  What makes it odder still is that so many of these companies like Nordex and Enercon were highly experienced in building onshore wind turbines or industrial giants like Samsung, Hyundai, Fuji and Areva with decades of experience in electrical generation and deep enough pockets to survive the initial R&D, yet they still found the offshore market too tough to survive.

First of all, it is important to recognize that many of these companies were relying on a home market advantage which hasn’t yet materialized in places like the US, Japan, South Korea, India, France and Spain. Although the market has grown rapidly, it is striking where it didn’t grow.

In anticipation of offshore wind eventually taking off on the American Atlantic seaboard, GE started experimenting by installing its 3.6 SL turbines in 2003 off the coast of Ireland. The American market, however, still hasn’t materialized a decade and a half later and GE’s turbines have only been deployed in a single 30 MW wind farm off the coast of Rhode Island. After the 454 MW Cape Wind offshore project was first proposed in 2001 off the coast Massachusetts, it faced a decade and a half of of lawsuits and public protests from local residents before it finally died in 2017.

Similar protests from the residents of  South Korea helped kill 2.9 GW of planned offshore wind farms in South Korea. The public opposition and the lack of firm commitment from the South Korean government led to Samsung, STX, Hyundai and Daewoo all fleeing the market. Samsung tried in vain to sell its turbines in Europe as well, without any success.

Fuji Heavy Industries developed a 2MW turbine with Hitachi for typhoon prone Japanese waters back in 2009 and has been testing it as a floating turbine since 2013, but it never saw much usage. After spending three years trying in vain to sell the Suburu 80/2.0 turbine to Japanese utilities, Fuji Heavy Industries sold out its stake in the wind business to Hitachi in 2012. Hitachi proceeded to loose millions of yen developing a 5.2 MW floating turbine that could be used in the deep waters off the Japanese coast and survive typhoon winds. Hitachi’s failure was partly due to Japan’s geography, but it was also due to Hitachi’s lack of focus. Rather than invest in renewable energy, it was been distracted by the joint ventures it created with GE in nuclear power and Mitsubishi Heavy Industries in thermal generation, which are both dying industries that will continue loosing money.

After the Fukushima Daiichi nuclear disaster in 2011, the Japanese government also prioritized saving Toshiba and Hitachi’s nuclear business and importing more liquefied natural gas, rather than pivoting to renewables. Most of Japan’s offshore wind potential is located in the less-populated, northern regions, but the country lacks an adequate grid to transfer electricity from Hokkaido and Tohoku down to Toyko and convert it from 50Hz to 60Hz to sell to western Japan. The Japan Wind Power Association estimates that only 96 GW out of a potential 378 GW of offshore wind capacity can be developed due to limitations in the grid. Although a feed-in tariff for wind and solar energy was introduced in 2012, Japan currently only gets 15% of its electricity from renewable sources and its current energy plan only targets increasing that percentage to 22%-24% by 2030. There is no clear plan for developing its offshore wind industry or upgrading its electrical grid for renewable energy.

After the Indian company Suzlon outbid France’s Areva to buy REpower in 2007, it proceeded to accrue $2.5 billion in debt as it geared up to sell its turbines in India where the government was offering big subsidies for renewable energy. Suzlon planned to build a  300MW wind farm off the coast of Gujarat before the Indian government slashed the energy subsidies. Suzlon was forced to abandon the idea of marketing offshore wind to the developing world and in 2015 it sold off its Senvion division in a fire sale to avoid bankruptcy.

In the past, the economics of offshore wind made it largely impossible to compete with other sources of energy, without the firm backing of governments and heavy subsidies. According to REN21’s 2017 report on renewables, the capital cost of installing a kW of onshore wind capacity in 2016 was on average $1263 in Asia, $1866 in Europe, and $1805 in North America. In comparison, installing a kW of offshore wind cost $3286 in Asia and $4207 in Europe. Block Island off the coast of Rhode Island, which was the first offshore wind farm in North America, had a capital cost of $5500 per kW. Even when factoring the higher capacity factors for offshore wind due to the fact that that the wind speed is higher and more constant, the offshore wind energy is still costs 20% more than solar and 40% more than onshore wind. There is more wear and tear on offshore turbines subjected to coastal storms and accessing the turbines by boat or helicopter makes the maintenance costs much higher. What ultimately killed the Cape Wind project was not the 23 lawsuits and the public protests, but the fact that the power utilities didn’t want to pay the contract price of $220 per MWh when they could get cheaper electricity from other sources.

Only in Europe where the governments had strong mandates and were willing to massively subsidize offshore wind, was it able to take off. China had a similar experience as Japan, Korea and the US with offshore wind, until the government stepped in a couple years ago and started mandating its installation. China’s offshore wind installations didn’t take off nearly as fast as called for by the government’s five year plan, but it is now expected to grown 40% per year until 2020 due to the Chinese government’s goal of transitioning away from coal as fast as possible. South Korea and India are just as dependent upon coal as China, yet they don’t have the same level of governmental support to drive their offshore wind industries.

Even in places where the subsidies were strong and there was governmental support to grant regulatory approval, most wind turbine manufacturers lost their shirts in the offshore business. It takes years of prototyping and testing to develop a good offshore turbine that power project developers are confident enough to buy, since the maintenance costs and potential financial risks in coastal waters will be much higher than on land. The technical problems BARD experienced before it went bankrupt, convinced project developers like Orsted (formerly DONG), E.ON, Innogy, Vattenfall and Northland Power that it was very risky to go with untested offshore turbines and newly designed electrical conversion and transmission systems. One of the reasons why Vestas and Gamesa paired up with Mitsubishi Heavy Industries and Areva, respectively, was because their experience in electrical generation and transmission reassured wind project developers. On top of that, new types of ships, cranes and foundations needed to be designed to install offshore turbines and developing the best techniques and figuring out the logistics took years of costly experimentation.

After Siemens established an early lead in the offshore market and had a battle tested turbine model like SWT-3.6-120 with thousands of deployments, it was hard for any other company to compete in the offshore market. Companies like Samsung invested millions only to discover that it would take millions more in costly testing and small-scale deployments to convince the big wind project developers to risk their capital on their untried turbines. Even worse was the fact that there were very few offshore wind projects to go around and they often took far longer in the planning, financing and regulatory approval than initially expected.

The steep cost of entering the offshore market was coupled with the double whammy of reductions in renewable energy subsidies in Europe, India and the US. Between 2013 and 2016, direct subsidies for wind energy in the US fell 80%, from 6187 to 1266 million dollars. After Spain eliminated most of its renewable energy subsidies, its two wind turbine manufacturers, Gamesa and Acciona, could no longer survive as independent companies. Gamesa sought the safety of a merger with Siemens and Acciona sold itself off to Nordex. The margins for turbine manufacturers have grown smaller as the subsidies have dried up and energy companies have fewer profits so they are willing to pay less for turbines. According to the World Energy Council, the average selling price of onshore wind turbines in the US has dropped from roughly $1500 per kW in 2008 to between $950 and $1240 per kW in 2016. China has experienced similar trends with the price of wind turbines falling 37% between 2007 and 2016.

The price of offshore turbines is dropping at a faster rate than onshore turbines, judging from plummeting prices being paid for offshore wind electricity in public bidding. In the UK’s latest round energy auction for offshore wind, the winning bid of £57.50 per megawatt hour was over 50% lower than the average £117.14/MWh awarded in the last comparable bidding round just two years ago. Maryland will paid $132/MWh for its offshore wind electricity that is scheduled to come online in 2020, compared to the $250/MWh paid for Rhode Island’s Block Island offshore wind farm, which came online in 2016. The price of European offshore wind electricity has dropped from roughly $0.17 per kWh in 2010 to $0.13 in 2017, and recent auctions for offshore wind farms in the Netherlands in 2022 and Germany in 2024-5 will sell electricity at the unsubsidized price of $0.06 per kWh. It is highly likely that other countries will follow the example of the Netherlands and Germany and start auctioning off future wind farm concessions at unsubsidized energy prices.

There is the potential for massive growth in offshore wind. Many governments around the world have formulated new plans to install offshore wind on a massive level, such as Belgium (4GW by 2028), Netherlands (11.5GW by 2030), Germany (15GW by 2030), Taiwan (5.5GW by 2025), France (3.3GW by 2023), UK (18GW by 2020), South Korea (13GW by 2030), China (30 GW by 2020), New York (2.4GW by 2030), New Jersey (3.5GW by 2030) and Massachusetts (2GW by 2027).

There are a number of companies that plan to challenge the duopoly of Siemens Gamesa and MHI Vestas in offshore wind. GE is promising to finally bring Alstom’s Haliade 150-6MW to market in 2019. GE also plans to be the first company to introduce the next generation of offshore turbines in 2021 with its gigantic Haliade-X, which will have a capacity of 12 MW and 107 meter long blades. GE has both the resources and the technical know-how to design such a monstrosity. It recently bought the Danish company LM Wind, which manufactures the longest blades in the world, including 75.1 meter blades for Goldwind and 88.4 meter blades for Adwen.

Hitachi is also gearing up to finally enter the offshore market after years of testing and prototyping. However, Hitachi recently announced that it will install 21 of its 5.2MW turbines in Taiwanese waters, so it appears to finally be entering the commercial offshore market in a serious way. Goldwind might also become a serious competitor in the future. The Chinese company is now testing its GW154/6.7MW and promises future GW164/6.45MW and GW171/6.45MW models. The prospects look good for GE, Hitachi and Goldwind, since each company should have a special advantage in their home markets of the US, Japan and China, respectively.

My prediction is that only Siemens Gamesa and MHI Vestas will be able to compete globally in offshore wind. Senvion will probably either be bought up or go bankrupt, since it can’t compete with the global giants. Goldwind will become a regional player, that dominates in China, but also gets installed in some developing countries that receive financing from China. GE might be able to challenge the global duopoly of Siemens Gamesa and MHI Vestas, especially if it ends up being the first company to bring a 12MW turbine to market, while its competitors are stuck with 8-9MW turbines. However, I think that it more likely that GE will be a regional player limited to North American shores. GE is currently betting big on offshore wind, but it is the type of company where a future CEO might decide that it isn’t getting enough orders for its offshore turbines to justify the high costs, and decide to quit the market. As for the rest of the companies, they have done little except produce some prototypes to test and they are unlike to ever bring any offshore wind turbines to market in a serious way.

The problem is that developing the next generation of 12+ MW turbines is going to be so expensive that only a few giants can compete. Offshore turbine manufacturing is becoming like jumbojet manufacturing. It takes tens of billions of dollars to do the necessary R&D and many years of large orders are needed to pay back those costs. In an industry where the technology is changing so fast, there is little guarantee that a turbine model will be used long enough to ever repay the development costs.

Developing the current generation of 5-9 MW turbines took longer and cost more than than anyone in the industry anticipated. Vestas, the largest turbine manufacturer in the world, started developing its V164 in 2009 and it took nearly 8 years to take it to serial production. Siemens also started developing the SWT-6.0-154 in 2009, which is a huge investment for a turbine which ended up seeing almost no commercial deployment before being replaced by a better model. Alstom started testing prototypes of the Haliade 150-6MW back in 2012, yet GE won’t bring it to market until 2019.

By the time the industry starts developing the 20+ MW offshore turbines, the R&D for these turbines will probably cost as much as developing the Boeing 787 and Airbus A380. A small company like Senvion simply can’t compete at that scale and larger companies like GE, Hitachi, Doosan and Goldwind that are currently determined to compete might loose so much in the attempt, that they will throw in the towel.

If northeastern states in the US keep delaying their plans for offshore wind parks and the Haliade 150-6MW flops in the market, GE might throw in the towel and stick to less risky ventures.

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Jordan Peterson ignores the importance of social policy in addressing societal problems

Jordan Peterson was recently interviewed in San Francisco by Simulation, which is a series of talks and interviews with interesting people. As one of the “radical leftists” and “cultural Marxists” that Jordan Peterson loves to mock, I actually enjoyed listening to this talk and I learned some interesting things from Peterson. I can’t say the same about Sam Harris, Ben Shapiro or most other conservative commentators, so I definitely recommend watching the whole interview on YouTube:

The interview was a wide ranging conversation on a whole slew of topics and the interviewer wasn’t very well prepared in my opinion on the academic topics that were discussed, so Peterson was able to opine freely with little push back. I suspect that Peterson would have been taken to task on a number of his arguments in an academic convention, but he is playing in the court of public opinion, which is much less knowledgeable on these topics.

On the question of wealth redistribution, Peterson argues that wealth and achievement naturally accumulates toward the top in all societies, even in prehistoric societies. In making the argument that overaccumulation of wealth at the top is feature of all societies, he throws up his hands and says “nobody knows what to do about it”. He ignores all the ways that societies thorough out history have alleviated overaccumulation of wealth at the top.

Peterson even argues that wealth will accumulate naturally in the hands of the people with the most intellectual ability, which is better for society, since they will use that wealth in the most productive fashion. In making this argument, he ignores all the empirical evidence showing that wealth redistribution has a lot of benefits for society as a whole. Redistributing wealth toward the bottom causes more economic growth than distributing wealth toward the top, because it causes money recirculation in the national economy. Also, the studies of a universal basic income, providing apartments to homeless people, investing in low-income schools, guaranteed retirement funds, and raising the minimum wage all show economic and social benefits to the society as a whole. Peterson uses the example of the cocaine addict who misuses extra wealth and ends up overdosing, but Peterson uses the example of a few outliers and generalizes for all of society. There is a great deal of academic literature to showing the benefits and efficacy of redistributing wealth toward the bottom of society.

Peterson pretends that the most productive thing to do with wealth is to let the richest people keep it and uses the example of Bill Gates using his wealth to cure malaria, polio, sleeping sickness and other diseases. Yes, there are people like Gates and Musk who use their wealth productively, but there are many more like the Koch Bros, Sheldon Adelson, etc. who use their wealth to corrupt the economic system and destroy democracy. The economic literature supports some wealth inequality to promote growth, but it is clear that the level of wealth inequality that we currently have actually depresses economic growth because it destroys demand in the economy and reduces the recirculation of money.

On an individual basis, I think Peterson has a lot of insightful advise for how people can improve their lives, but he is a psychologist treating individuals who are generally outliers. A sociologist who does statistical analysis on society as a whole comes to opposite conclusions about what is good public policy. For example, individuals should think that working hard leads to success and there is some evidence for that. But, it is also true that society investing in schools and training, especially for the underprivileged has huge benefits, which Peterson seems to ignore. He looks at the lowest 10% and says that it is pointless to provide training to them. However, he ignores the 90% who would benefit from extra schooling and training. I work as a computer programmer and I can tell you that there are some people who simply don’t have the mind to be good programmers, but there are roughly 25% who do, but only 1% every get the training to do it. For those 24% of society who have the mental ability but not the training to be programmers, they would really benefit from free or subsidized education programs, as any sociologist would tell you. Peterson has nothing so say about the “radical left” proposals about how to better fund education for the disadvantaged.

Another major hole in Peterson’s argument is the fact that he ignores how IQ is influenced by environment and he ignores all the proposals of the “radical left” to improve the environment for the disadvantaged. For example, Peterson has nothing to say about proposals to improve the nutrition of people living in food ghettos and how to give people economic security to create the kind of stable and secure environments which produce children of high IQ. I appreciate all of Peterson’s insight into the importance of play, but otherwise he is remarkably silent on the kind of social policies that are needed to help the development of children and raise their IQs.

Peterson is right to point out how wealth and success accumulates to the few at the top, but he has zero to say about how to alleviate that overdistribution towards the top. He basically pretends that that it is a natural function and we don’t have any idea how to alleviate it. Many societies have features which mitigate the overaccumulation of wealth at the top, whereas unregulated Capitalism promotes it. There is a major difference between today’s neoliberal Capitalism that concentrates wealth and the giving away of wealth in order to gain social status among the Native Americans of the Pacific NorthWest. Peterson pretends that there is no social policy to address the overaccumulation at the top (other than making war and promoting plague), whereas any sociologist or historian could point to dozens of ways to address this problem (including changing Capitalism, which Peterson refuses to consider).

Peterson talks about the studies among animals showing that reciprocity arises naturally from play and is essential for development. Based on those studies, he concludes that morality is universal and a natural development from play. Strangely, he doesn’t use those same studies to advocate for good social policy. For example, he discusses the studies that show that stable hierarchies occur among chimpanzees when the dominant males establish friendships with the lesser males and look out for the welfare of the baby chimpanzees. In contrast, instability and violence occurs in chimpanzee society, when the males at the top of the hierarchy use physical domination and treat the lower chimpanzees badly, which leads to short reigns of power which are quickly overthrown.

Peterson is strangely silent on the social policy implications of the very studies he cites. The “radical leftists” who Peterson derides would look at those studies and conclude that it is a bad public policy to spend huge amounts on the police and military budgets. They would advocate against domestic policy based on police violence and a foreign policy that tries to physically dominate other nations.

Peterson also talks about the studies where $100 is shared between two people and Peterson noted that the people who are generous and share over 50% will do better in the long run. He doesn’t use those studies, however, to conclude that the wealthy should be forced to share their wealth with the lower classes and treat then better if we want a stable and prosperous society.

Peterson is correct to point out that women on average are more interested in people and men are more interested in things, but that doesn’t mean that sexism doesn’t exist in the STEM fields or that we shouldn’t have social policies to encourage women and minorities to pursue those fields, just like we should have social policies to encourage men to become nurses and teachers. Sexist attitudes do exist in these fields of work and it helps society as a whole to overcome them. Men who find childhood development fascinating shouldn’t feel belittled and their masculinity challenged when they become kindergarten teachers, just like women shouldn’t be steered away from using math. We need social policies to fight against sexist attitudes in society rather than pretending that is entirely the natural interests of the sexes that lead to gender disparities in jobs. Peterson is right that there are different interests on average in the sexes, so some of the gender disparities are not socially constructed, but some of the disparity is also socially constructed. We have both biological and social and cultural factors that lead to gender disparities and he refuses to talk about the policies that are needed to address the social and cultural factors.

Peterson became famous last year when he argued against rules banning gender discrimination in speech in Canadian universities. Peterson derides the social construction of gender as having no basis in the scientific literature and dismisses it as a form of “cultural Marxism” promoted by leftist academics. It seems rather bizarre to me to call the social construction of gender a Marxist idea, since Marx believed that culture was arose from material production and was rooted in materialist interests of the classes. Marxian analysis of culture is diametrically opposed to the postmodern analysis used by many feminists, especially when it is rooted in language. What people like Peterson call “cultural Marxism” did arise from leftist academics, who were often sympathetic to Marxist movements, but it is downright disingenuous for Peterson to tar them as Marxists if you know anything about the philosophical basis of Marx’s arguments.

Peterson criticizes Silicon Valley companies for trying to hire more women and people from diverse backgrounds. He seems oblivious to the studies showing that businesses which have more women, more racial minorities and more diverse backgrounds of their employees tend to function better and are more successful.

In conclusion, there is some truth to Peterson’s arguments about a competence hierarchy rather than a domination hierarchy and the natural distribution of rewards toward the top, but he is strangely silent on all the academic studies about how racial and class bias make a difference in success and promotion (as well as religious bias in some countries). He is right to criticize many academics for failing to acknowledge that biology and natural tendencies play a role in many of society’s problems, but he fails to acknowledge that there are also social and cultural factors at play and that social policy can play a important role in addressing these factors.

Questions about how to reform the electronics industry

A friend of mine asked me why I wrote a recent post about how capitalism has failed to produce a smartphone that I want to buy. Don’t I know that a socialist economy would produce far worse phones, so why am I complaining? Consumer electronics wasn’t exactly a strong point of the Soviet block countries or Maoist China.

I don’t want to live under pure socialism or pure Capitalism because they both lead to too much concentration of power in too few hands. Both are lovely in theory but both lead to dystopias in the real world, especially when practiced in their extremes. However, the vast majority of the world lives in a mixed economy. The real question in almost every society is what areas of the economy should be socialized and what areas should be run by private enterprise which are subject to governmental regulation and what should be the degree of that regulation.
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Reflections on building my own solar panels

Over the last decade solar energy has gone from the hobby of oddball engineers and rich eccentrics to a viable way of generating energy for millions of people. Unfortunately, I live in Bolivia, a country where almost nobody uses solar electricity and it is difficult and expensive to import solar panels. Out of curiosity, I wondered whether I could get solar energy by building my own solar panels. I spent a couple weeks investigating how to make my own solar panels online and I would like to share what I found with anyone else who is thinking of building do-it-yourself (DIY) panels.

The idea of being able to generate my own carbon-free energy is very enticing. I live in a country where solar energy only comprises 0.25% of the national grid’s electrical capacity and bad public policy is currently deepening the country’s dependence on fossil fuels. Perhaps my desire to build a solar panel are born out of my sense of frustration at the powerless I feel to change the dirty development and environmentally-destructive policies being promulgated by the Bolivian government. I feel like I have to do something, however small it may be, to resist the relentless march toward the destruction of the planet and humanity’s role in that destruction. In this context, the idea of being able to build my own solar panels and participate in the democratization of energy is very empowering. Continue reading

The global production of electronic devices over the last decade

Electronic devices increasingly dominate the way humanity interacts and creates, so understanding what is happening in the electronics industry as a whole is a key component to understanding humanity’s future. Whether most humans will be interacting through desktop PCs, wearable smart devices or processors embedded in buildings and cars in the future will have a big impact on human society and how it functions.

Software, networks, communication protocols, media and everything else which runs on electronics are increasingly redefining and becoming embedded in human culture. This phenomenon is not new. To take just one example, look at how the evolution of electronics has transformed human politics. The advent of the transistor radio allowed political leaders such as Roosevelt and Hitler to transmit their words directly into people’s homes so they became a personal presence in people’s lives. The advent of the color television made people intimately aware of the visual features of politicians, so a youthful, telegenic man like John F. Kennedy could win a televised debate. Statistical analysis and number crunching by computers and software models had transformed how political campaigns are waged and who is targeted by those campaigns. The rise of social media and billions of mobile devices made it possible for left-wing candidates such as Jeremy Corbin and Bernie Sanders to bypass the traditional media and appeal directly to their base, but it has also given voice to ultra-nationalism and bigotry on the right.

More overlooked is the fact that electronics is an enormous consumer of energy and resources. Despite the small size of its components, the fabrication and use of electronics has an alarming  impact on the environment, far beyond its its physical size. It is easy for humans to grasp the environmental significance of construction, transportation, agriculture or extractive industries, because buildings, automobiles, fields and mining pits are tangible, large in size and easy to visualize. It is not easy to visualize the movement of electrons through circuits or the generation of those electrons in distant power plants. As electronics becomes increasingly nanoscaled and its processing moves to remote server farms away from the public eye, it becomes easier to overlook the  impact of electronics on the environment.

In an effort to better grasp the scope of these impacts, both societal and environmental, it is necessary to first ask how much the global electronics industry is producing and what are the trends in its production. These basic questions are remarkably hard to answer, because most electronics firms do not release production numbers out of fear that they will negatively impact their stock prices or reveal too much information to their competitors. It is telling that the only significant maker of phones, tablets and PCs to consistently release its production numbers is Apple, which enjoys a protected niche where it controls its own hardware and software, so it is shielded from competition. The producers of game consoles used to release their production numbers, since the producers of games needed to know the potential market size of their games. Now, Sony and Microsoft only sporadicly release the total lifetime number of gaming consoles as part of an occasional press release, so production is impossible to track year to year or quarter to quarter.

Most of the production numbers in the electronics industry are compiled by market intelligence firms such as International Data Corporation, Gartner, IHS, etc., which are loathe to release too much to the public. Instead, they release just enough information to garner headlines in tech news sites and to convince people to fork over thousands of dollars for market reports, whose details they are legally forbidden to share. What is publicly released provides little historical context, since the press releases generally only focuses on one quarter or year and its growth rate compared to the previous time period. Stringing together a whole series of these press releases, it may be possible to construct an idea of change over time, but the market intelligence firms often change their definitions of what is being counted and delete old press releases from their web sites.

Trying to piece together the puzzle with publicly accessible information can be a very frustrating task. The rivalry of Gartner and IDC to be the premiere intelligence firm for PCs, smartphones and tablets leads them to consistently publish the number of units shipped every quarter, but other sectors of the electronics industry only merit an occasional press every couple years. Often these press releases contain a growth rate or an expected product number, without providing a single datum of historical production. Nonetheless, there is often enough to piece together a sequence over time with some interpolation and educated guesses.

The overwhelming trend of the electronics industry since its inception has been growth based on a smaller and often cheaper form-factor displacing most of the market for the previous form-factor. Hulking mainframes were displaced by mini-computers and terminals in the late 60s and early 70s. Those in turn were displaced by personal computers and networks in the late 70s and early 80s. In

On those personal computers, the bulky RS-232, DB-25 and VGA ports were replaced by smaller FireWire, USB, DisplayPort, HDMI and Thunderbolt ports, which in turn are now being replaced by even smaller micro-USB, micro-HDMI, Lightning and finally USB Type C ports, which threatens to replace them all.  replaced by smaller and DisplayPortand ISA slots were replaced by the Bulky bulky parallel ports were replaced by smaller Firewire andTreplaced mainframes in the late 60s and personal coe mputers replaces Given these problems, here is

 

 

from twhich are loathe to release it  to   information publicly available, compared to the  Unfortunately, most of what is known about the global electron out  out the global production understand I started to compile to understand how

in build will have a big  has How many devices are being  Since The global production of advanced electronic devices dropped in 2016 for the first time since the economic downturn of 2008-9. The number of smartphones, smart wearables (such as the Apple Watch), camcorders and handheld game consoles grew in 2016, but the production of 2,817.3 million electronic devices in 12 different categories was 2.8% less than in 2015.

ElectronicDeviceProduction2006-16

Over the last decade smartphones have eaten away at the market for most of the types of electronics listed in the table above. Once smartphones began to produced on a massive scale starting in 2007, they largely replaced the market for PDAs, cameras, camcorders, portable media players, GPS devices and handheld game consoles. Global production peaked in 2008 for portable media players, handheld game consoles and portable GPS devices and in 2010 for cameras and camcorders. These devices have largely been relegated to niche items for specialty markets.

The cheap point-and-shoot cameras which were so popular a decade ago have mostly disappeared from the market. Most cameras being sold today are more expensive models with better zooms, sensors and image processors than found in a standard smartphone. According to CIPA, only 6.7% of digital cameras produced in 2006 contained an interchangeable lens, whereas that percentage had grown to 47.8% a decade later in 2016.

Likewise, the market for standard camcorders has also largely disappeared, as most consumers now have a smartphone for low-quality filming. There is still a good market for professional quality camcorders, but almost all the growth in recent years has been for action cameras, known as “action-cams,” that are water proof and can be worn unobtrusively on the body. Frost and Sullivan estimate that 62% of the camcorders produced in 2016 were action-cams.

The same relegation to niches is occurring for GPS devices. According to IHS iSuppli, global production of GPS devices peaking in 2008 at 42.08 million devices. For many consumers, the maps on their cell phones provided by Google Maps, Waze, Apple Maps or OpenStreetMap are good enough to avoid buying a dedicated GPS device from a manufacturer such as Garmin or TomTom. GPS devices have been forced to increase the quantity and quality of their offline maps in order to differentiate from the free online maps that come with most smartphones and tablets. The need for greater offline storage capacity and higher resolution screens in these devices has increased their manufacturing costs, so they often cost as much as a mid-range smartphone with less functionality.  There is still a niche market for people who need a navigation device to drive in places with cellular dead zones or have limited cellular data plans, but it will become increasingly difficult to justify a dedicated GPS device in the future as cellular data plans continue to get cheaper and the data collection in online services such as Google Maps provides better real-time information about traffic and road closings.

Although Garmin remains the leader in the shrinking car navigation market, most of Garmin’s focus today is on the growing market for wearable GPS devices that can also track biometric information such as heartbeats, running steps, golf swing speed, swimming strokes, etc. While Garmin can charge a premium for these fitness wearables, the market is limited and cheaper devices from companies like Fitbit are encroaching on their premium market. Smartphones are also incorporating biometric sensors and becoming thinner and more water-proof, so it may be just a matter of time before   Like camera and camcorder manufacturers, GPS device makers  have been forced to focus on the high end of the car navigation market or or the  Many experts here is a growing market for action GPS become increasingly difficult for GPS device makers to compete with the network effec

Further analysis will follow, but for now here is the data:

GraphGlobalElectronicDevices2006-16GlobalProductionOfSilicon2000-16TVGameConsoleSales1994-2016PortableGameConsoleSales1994-2016GameConsolesMarketShare1997-2016GameConsoleSales1994-2016GameConsolesByModel1994-2016GlobalGamesMarketNewzoo2012-17

The short-sighted missteps of the server companies

Apologists for Capitalism are wont to wax eloquent about the creative destruction they see in the tech industry. They see the vertiginous rise and fall of tech companies in the Silicon Valley as a beautiful system that weeds out the laggards who aren’t nimble enough to keep adapting, while rewarding the creative innovators with huge pay offs.

Frankly, I see the skyrocketing stocks and crashing failures of the tech industry as a condemnation of how modern Capitalism functions. The erratic fortunes of the tech companies generates a tremendous amount of stress in the lives of the people who work in these companies. The directors of tech companies often make decisions which are based on short-term profit margins, raising the stock prices or cashing out those stocks, rather than producing a quality product or service and working toward long-term goals that will help the company grow in the future and provide stable employment for the employees.

We can see this destructive dynamic playing out currently in the server business. Fifteen years ago, IBM was the undisputed leader in the server business. It had a long tradition of offering quality servers, which were pricey, but its engineers were known for the high quality of their support and services around servers. IBM was also renowned for for offering the best line of PCs for enterprise, which came with excellent support and long-term warranties. IBM’s Thinkpad and Thinkcentre lines were highly sought after PCs, due to their engineering excellence and sturdy construction. The Thinkpad laptops generated a special kind of brand loyalty among engineers and geeks, who took exceptional pride in owning the coveted boxy, black devices. Unfortunately, PCs were turning into mass market devices with slim profit margins under 3%, so IBM’s PC business was nearning the company very much.

Still, as the inventor of the PC and a long tradition of quality engineering and reliability, IBM’s PCs added a certain cachet to the reputation of the company. IBMers knew that HP and Dell might move more PCs, but they could take pride in the fact that they offered quality PCs and people trusted them to provide the best support in the industry. More importantly, IBM’s PC business gave the company an entry way into businesses to sell them more lucrative contracts in other areas. The support contracts for the PCs were a vehicle for Big Blue to talk to companies about their other IT services where IBM did earn large profit margins. Having a PC business allowed IBM to offer comprehensive IT services for companies and helped keep its competitors HP and Dell away from its clients.

Rather than think about PCs as an essential piece that helped enable their servers and software businesses, the directors of IBM fixated on the fact that PCs were being commoditized with low-profit margins. They decided that IBM should only focus on areas with high profit margins, so in 2004/5 they sold their PC business to Lenovo, a Chinese original design manufacturer who had been building their Thinkpads since 2002.

IBM essentially shot itself in the foot, although it would take a while for that fact to become evident, so the managers at IBM would pat themselves on the back for increasing their profit margins and getting rid of many costly employees in North America and Europe who they passed to Lenovo. In addition, they gained entry to the growing Chinese market, because Lenovo promised to direct their Chinese customers toward IBM’s server business. It looked like a great decision on paper, but in the long term, divesting from the PC business helped to undermine IBM’s profitable server business. Not only did IBM help establish Lenovo as a major provider of PCs to enterprise, but it also gave Lenovo a vehicle to start offering their own servers to many clients of IBM and become a major competitor which undercut IBM in the x86 server market. By no longer providing PCs, IBM lost contact with many potential new clients for its server business and it gave its existing clients to start talking to HP, Dell and its new competitor Lenovo for their IT services, since IBM could no longer offer a comprehensive IT solution for businesses.

After selling its PC devision to Lenovo, IBM gradually lost market share in its server business, especially among x86 servers, where all the growth in the industry was occurring. IBM’s biggest profit margins lay in mainframes and in AIX on the POWER architecture, but the market share of both mainframes and UNIX servers was already in long-term decline and that decline further accelerated after the economic crisis of 2008/9, as many companies sought to reduce their IT budgets by switching to cheaper x86 servers running Linux or Windows, reducing the number of servers through virtualization and by outsourcing their servers to third-party clouds.

While IBM maintained its formidable advantages on big iron, only a select number of companies and governments now needed mainframes. Much of the computation formerly conducted on mainframes moved to distributed networks of low-end x86 servers. High performance computing is increasingly moving to the cloud, where IBM certainly competes, but cloud computing is a cut-throat business dominated by Amazon, Google or Microsoft. The advent of the Moreover, many of the new mainframes were now located in China, where the government was eager to promote national companies shifdistributed computing on  found fewer and fewer reasons to use old-style mainframes

 

shrank, while the low-end servers based on the x86 architecture grew to take over most of the market. Since IBM was no longer a first tier eventually became new provider of In the long term, however, IBM opened up their rid of a business with low-profit margin

 

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