In what can be seen and judged as a triumph for the free market and an epic failure for government interference, Der Spiegel reports the following headline:Wind Turbines in Europe Do Nothing for Emissions-Reduction Goals
The story, authored by Anselm Waldermann, explains that the "greening" of German electricity, "Roughly 15 percent of the country's electricity comes from solar, wind or biomass facilities, almost 250,000 jobs have been created and the net worth of the business is €35 billion per year." Ok, not bad, but what's the catch?
It turns out the that carbon credit trading scheme hasn't accounted for any reduction in carbon emissions, and Waldermann places the blame on the EU-wide emissions trading system. As it turns out, the system determines the total amount of carbon output. However, it hasn't reduced that amount as new alternative energy plants are built. In other words, carbon credits are oversupplied. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com
So, now what, cries German climate-sensitive folks. Well, like most things bureaucrats design, they don't consider human nature. Companies aren't going to run and spend millions of share holders dollars to build windmills when they build a new coal plant cheaper. Mountain House Freeze-Dried Food
This story does have a happy ending! The German Green Party recognized that the best way to make this system work is to spend the money more efficiently. And here is the "A-HA!" moment:
"When reduction of CO2 emissions is more cheaply achieved through insulating a building than using a wind turbine, that is where we should concentrate our support."
And here is the chart that goes with the proverbial light bulb:
The Costs of CO2 Reduction
To reduce CO2 emissions by one ton, it costs (in euros):
Building Renovations (90% of cases) <0>100
Modernizing an old black-coal power plant 20
Reductions in industrial CO2 emissions >20
Replacing black coal with natural gas 28
Brown-coal power plant with carbon capture technology >30
Modernizing a new black-coal power plant 50
Replacing brown coal with natural gas 50
Black-coal power plant with carbon capture technology >50
Biomass >50
Biofuel >50
Wind Energy 50-60
Geothermal Energy >100
Solar Energy (Photovoltaic) 300-500
* A value less than zero indicates that the measure is actually profitable.
Sources: McKinsey, RWE, German Renewable Energy Federation
As one can clearly see, it doesn't make sense to spend tons of money to reduce carbon, rather, making simple changes is considerably more profitable. That is what business is all about. When a company can reduce costs and still deliver a high quality product, they will make a profit and share holders will be happy. In the words of Nelson Muntz, "HA-HA!"
9 comments:
The footprint, intermittency, variability and expense relative to electrical output inherent with wind and solar make both forms of electrical generation extremely unattractive. Plus, they require a reliable baseload backup (i.e., coal in the case of Germany - perhaps a reason CO2 emissions have not decreased?). If a reliable baseload backup is needed, why bother installing wind or solar capacity to begin with? No-one in a free market would ever build wind or solar generating plants. The entire industry is built on government subsidies, carbon credits and tax breaks.
At the present time, nuclear power is the only way to produce reliable electricity at modern industrial levels without increasing CO2 emissions. It would be interesting to compare how much Germany has spent on wind and solar per actual MW produced (not capacity) with the cost of nuclear. I wouldn't be surprised if nuclear came out way ahead in both cost per MW and CO2 emissions.
Bill,
Excellent analysis!! I would bet that you are right. The key is the need for a base load and most renewables can't meet that need, though you can successfully argue that nuclear is indeed renewable!
Thank you for your comment and I encourage you to comment again!
~gormanwvzb
Today, 2/17/09, there is an interesting article in The American Spectator that supports the point I made yesterday. Here's a taste:
"Wind produces virtually no dispatchable electricity, which is what you need on an electrical grid," says John Druz, Jr., a physicist who has been campaigning against wind in upstate New York. "It's completely unpredictable and it doesn't correspond to any periods of peak demand." (Solar electricity does correspond with afternoon and summer peaks, which gives it some marginal value.) "All these wind farms are billed as producing 200 or 400 megawatts, but that's only their nameplate capacity. They only deliver electricity 20-30 percent of the time at best. Because they're so unpredictable, you can't shut anything else down. You always have to have fossil fuel plants running as back up. You can claim you're getting 20 percent of your electricity from wind, but the net reduction in carbon emissions or use of other fuels is zero." (bold emphasis added)
The article can be found here - http://tinyurl.com/bzcc4j
With all the baseload plants in place, there is currently no need for wind power storage. With more wind and solar power plants (and advances in storage options), they will also install storage to control peaks and troughs.
Second, this article presents a false choice: we don't have to renovate existing plants to make them cleaner OR build renewable energy plants. We can do both.
And last, regarding: "No-one in a free market would ever build wind or solar generating plants." No one in a free market would ever build sewage treatment facilities either, or find non-toxic ways to make bright white paper. For decades, we just dumped sewage and chemicals in the nearest waterway.
The free market is free to kill you for short-term gain. It is worth it to pay more for a cleaner environment.
Derek,
Thank you for your comments.
I am not opposed to having supplementary solar or wind power, but with current technology, it is not economically efficient. I don't care to have my taxes go to subsidize these things.
Regarding sewage treatment plants, those by nature, are not economically efficient, and thus have been run by governments. Unfortunately, we see the lack of clean drinking water in India, China, etc., as clean water is not a government priority in those states due to cost.
The free market is best thought of as the aggregation of individual decisions by populations. When consumers decide they want improved products, such as clean water, or organic produce, they pay for it.
The market is not an entity or an actor, but rather the consequence of individual decisions.
Thank you for your thoughts and I encourage you to comment often.
I really appreciate your direct reply. But what's the difference between the government paying for sewage treatment to keep waterways clean and the government paying (much smaller) clean energy subsidies to keep the air clean?
My point about a free market is that individuals tend to act selfishly and that can have widespread negative results. It's the tragedy of the commons: what we all share we all abuse unless we agree on rules to regulate its use.
And when consumers decide they want something, they can either buy it themselves or--if it's a huge, societal investment like highways, sewage treatment, and clean energy--they can elect people to government who will use taxes to buy it. Both of those are free market choices.
Derek, again excellent points.
When it comes to subsidy preference for power, I prefer nuclear, as it provides the most available, consistent, and clean power for the dollar. While I have no objections to utilizing our environment for energy in a responsible way, I don't wish to pay 24 times per kwh for solar than for nuclear.
One final point, the US should be recycling ALL nuclear fuel, just like France. Jimmy Carter's unreasoned fear of terrorists has set this country's nuclear industry back almost 40 years.
Thank you again for your contributions to a lively and educational discussion!
Do you still feel the same about nuclear power? NO momentarily cheap electricity price can equalize the cost (to society and economically), of the eventuality of a nuclear disaster.
I assume you are refering to Japan? Last I checked, no nuclear power plant in the world is safe against 9+ rictor scale earthquakes followed by 40 foot tsunamis. And of course, ZERO people died of radiation in that tragic accident.
Oddly, I would consider the whole experience a validation of success for nuclear power - even under the most dire circumstances possible, using old outdated (40+ year old) tech., no one was injured or killed by radiation.
Contrast this with windfarms - windmills kill an average of 70,000birds in the U.S. annually, and about 40 deaths to workers in the last 40 years. If nuclear power had a record like that....
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