Response to comments on renewables pricing

NOTE: I publish these here because the remarks to which I respond are typical.  Various forms of renewable energy do cost more, especially on a market price to market price basis, than their older counterparts.  There is much to be said about this, and I review just a few points below.  JG

Coleman Dunmar’s calculation is clearly wrong in at least 3 respects.

First, the wholesale price of electricity constitutes roughly ½ of retail electric bills; the remainder goes to distribution and transmission, administrative overhead, profit, etc. Thus, all other things being equal, a doubling of wholesale power rates would cause retail bills to rise by 50%, rather than to double.

Second, for the sake of argument, let’s accept at face value Dunmar’s assertion that new renewables projects are coming on at present are “4 to 5 times the market price.” Presumably, this is meant to describe the AVERAGE renewables price versus the average market price. (My guess is that both parts of this description are incorrect, but I don’t have the time to research the point right now).

Even if one assumes that this correctly describes the relationship TODAY, it clearly does NOT describe the relationship 10 years from now. Everything we know about inflation in general and electric prices in particular says that market prices 10 years from now will be higher than they are today; in nominal terms, we can expect them to be SIGNFICANTLY higher. Similarly, but inversely, the history of renewables, especially solar photovoltaic which is currently one of the most expensive, if not the most expensive source, suggests that rates for renewables will continue coming down at an impressive clip. It is therefore pretty certain that however the comparison might be today, it will look exceedingly different 10 years from now. Put bluntly, wholesale market prices are virtually certain to rise and renewables prices are quite likely to have fallen substantially. Any calculation which ignores both of these points is virtually guaranteed to reach a false conclusion.

Finally, Dunmar’s whole exercise ignores the economic externalities involved here. Dunmar and others who oppose renewables hammer away at the large subsidies they have received in the last few years. They completely ignore the enormous subsidies which went into all of the competing forms of energy. Many of these subsidies continue today. To take the nuclear industry, with which I’m most familiar, I strongly suspect that if the Price-Anderson Act were repealed, every nuclear power plant in the US would close the next day. Nuclear apologists can argue till they’re blue in the face that no one is killed by radiation, but I don’t see them moving to the areas around Chernobyl and Fukushima to take advantage of the tremendous opportunities in depressed real estate.

In addition to subsidies, however, fossil fuels and nuclear power are premised on huge environmental impacts, the costs of which will be borne by governments, businesses and individuals long after the plants close. The US has spent 10s of billions of dollars beginning to clean up the environmental devastation caused by the early years of uranium mining, milling and enrichment, as well as the failed attempts to dispose of the waste products of the uranium fuel cycle. The problem of nuclear waste remains unresolved, and will clearly cost 10s of billions more. These are completely independent of the possibility of future accidents.

Coal and oil or gas fired plants and mining (drilling) cause tremendous amounts of air and water pollution, with concomitant health and safety impacts over huge geographical distances. For example, Vermont’s forests were devastated by acid rain coming from Midwestern coal plants. And of course, there’s the looming problem of global warming.

All of these should be factored into any comparative consideration; but the fact is, they almost never are and, unfortunately, Dunmar’s calculus is no exception.

The whole discussion can be found at:

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