Text 1 Energy problems
Energy problems
Renewable energy sources, unlike fossil fuel, can be used without ever being used up. These are typically sources such as sun, wind, water and Earth’s internal heat.
It is important to focus on the fact that the difference in cost between traditional fossil fuels and some of the cheapest: renewable energy sources is so relatively slight. Moreover, these economic costs do not include the negative social cost of fossil fuel use on the environment. Energy from a coalfired power plant may still be 20-50 percent cheaper than the energy produced by a windmill, but if the effects on environment and humans from coal pollution and waste products exceed the price difference then society ought to choose wind energy.
Recently, one European and two American large-scale projects have attempted to examine all costs associated with electricity production, all the way from the mortal risks of mining coal, the traffic hazards of transportation and occupational hazards of production including consequences of acid rain, particles, sulfur dioxide, nitrogen oxides and ozone on lakes, crops, buildings, children and old people and up to the consequences of tax codes and occupation plus a long, long list of similar considerations and costs. Altogether these studies find that the extra social cost of new coalfired power plants is around 0.16-0.59 cents per kWh. None of the three studies, however, quantifies the costs of carbon dioxide which probably means an additional 0.64 cents per kWh.
Consequently renewable energy actually has to drop somewhat in price before it will be competitive, even including social costs. Nevertheless, it is estimated that the price of renewable energy will fall faster than the price for conventional energy. It should however also be added that there is still quite a bit of uncertainty about the predictions of such prices, because early predictions in hindsight have seemed rather optimistic. In 1991 the Union of Concerned Scientists predicted that solar power today would drop below 10 cents per kWh, but unfortunately it has still only dropped to about 50 cents per kWh.
Thus,
it is unclear whether it is necessary to support renewable energy with
subsidies and tax exemptions. In Denmark this subsidy is as much
as 5 cents per kWh for wind energy, and in the US, subsidy for wind power
is estimated at about 1.5 cents per kWh. It would still be much more effective to tax energy such that its
actual price would adequately reflect the social costs in production and
emissions.