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