Picking energy winners

The problem with government trying to pick winners is that it usually ends up picking losers. So too, it seems, with renewable energy.

renewables

That graphic is from The Economist (and was reproduced in the AFR yesterday). It shows the costs and benefits associated with different alternatives in producing electricity. In particular for producing low or even zero-carbon electricity.

If all the costs and benefits are totted up using Mr Frank’s calculation, solar power is by far the most expensive way of reducing carbon emissions. It costs $189,000 to replace 1MW per year of power from coal. Wind is the next most expensive. Hydropower provides a modest net benefit. But the most cost-effective zero-emission technology is nuclear power. The pattern is similar if 1MW of gas-fired capacity is displaced instead of coal. And all this assumes a carbon price of $50 a tonne. Using actual carbon prices (below $10 in Europe) makes solar and wind look even worse. The carbon price would have to rise to $185 a tonne before solar power shows a net benefit.

There are, of course, all sorts of reasons to choose one form of energy over another, including emissions of pollutants other than CO2 and fear of nuclear accidents. Mr Frank does not look at these. Still, his findings have profound policy implications. At the moment, most rich countries and China subsidise solar and wind power to help stem climate change. Yet this is the most expensive way of reducing greenhouse-gas emissions. Meanwhile Germany and Japan, among others, are mothballing nuclear plants, which (in terms of carbon abatement) are cheaper. The implication of Mr Frank’s research is clear: governments should target emissions reductions from any source rather than focus on boosting certain kinds of renewable energy.

Original paper here.

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17 Responses to Picking energy winners

  1. H B Bear

    No surprises here. Only surprise is that this is still a policy debate and that governments are still prepared to damage their own economies without being punished at the ballot box.

  2. Mater

    We could be the world leader in the recycling of dormant, energy intensive, Desalination Plants into a highly productive, Green Energy producing Nuclear Power Stations?
    Surely a Green Business Certification is a fait accompli?

  3. Bear Necessities

    Just not pickings losers but not allowing potential winners to get on with winning. For example the NSW experience with CSG exploration.

    Whilst Newmann has many faults at least he hasn’t been afraid to get on the front foot with extractions of energy sources e.g. Coal, CSG and Uranium.

  4. Joe

    Nuclear is inevitably wrong as it usually assumes current technology costs.
    LFTR designs are progressing with a fraction of the costs displayed in the graph.
    If fact, so cheap is LFTR energy that ALL other forms of energy for base-load power would be driven out of the market.
    The only impediment to it’s adoption is THE GOVERNMENT.

  5. incoherent rambler

    Gas is one of a few fuels for transport. Why waste it on electricity generation?

  6. ar

    What’s the net cost/benefit for wind? Off the chart???

  7. Andrew

    What idiot said we could be the “Saudi Arabia of sun”?? The world leader in stuff that has negative value?

  8. “Gas not wind”.

    The ultimate paradox.

  9. AP

    The most interesting thing is that if you remove the ficticious “emissions cost”, coal is the same cost as hydro, cheaper than nuclear and only slightly more expensive than gas (although I can not see why that would be the case – it probably depends on the base assumptions used for gas price)

  10. AP

    Correction: fictional “Avoided Emissions” benefit.

  11. AP

    There is no waste disposal cost for nuclear.

  12. JohnA

    The Beer Whisperer #1400580, posted on July 31, 2014 at 9:05 pm

    “Gas not wind”.
    The ultimate paradox.

    It would seem as I read it that we need to break wind before it breaks us, am I right? :-)

  13. johno

    Why would this surprise anyone?

    The Greens are not interested in the environment. They are anti-prosperity and anti-industrial revolution.

    The Great Global Warming scam is the perfect vehicle to pursue this. Demonise all forms of energy that are plentiful and reliable. Glorify those forms that are useless to sustain industry and prosperity.

    If only Abbott and Hunt would realise this and take them on.

  14. incoherent rambler

    we need to break wind before it breaks us

    I will reuse this with your permission.

  15. JohnA

    IR, as Brutus said to Flavius Maximus:

    “You like it? It’s yours!”

  16. Pyrmonter

    Scrap the MRET and point of consumption technical standards; replace with a single, uniform, low carbon charge.

  17. BilB

    As usual this is a report to support a predetermined position, and as such it ignores the most probable future energy structure, distributed user generated energy production, and for that failure draws the wrong conclusions.

    The fact is that current and future compound solar systems have a demand delivery factor as high as 90% once the user demand profile has organised to complement the energy production cycle. Payback periods are between 3 and 10 years depending upon the degree of integration. Such systems are not restricted to domestic and small business, large organisations are registering their understanding of the benefits. One of the most compelling advantages is that of flat cost of energy over time, something that non of the other energy delivery systems can match.

    The uptake of distributed solar into the future is now certain, independent of Carbon Pricing, the only variable is uptake rate. Once the installation ratio passes 30% the uptake rate will be driven by property values and expectations that properties for sale are not complete without their coat of paint and their solar panels.

    A future grid energy system must be designed, if it is to be commercially viable, to complement the future distributed energy micro grid managed energy production profile. Heels dug in mental delinquent ideologues such as Australia’s Abbott and Co are doing the industry no favours with their current tack, as the public intuitively know what the future holds and are steadily adjusting as opportunities to invest in their future energy systems arise.

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