Greenpeaceonomics

Amanda Larsson from Greenpeace wrote in Stuff:

electricity prices are set based on the cost of the most expensive form of electricity. That’s generally the coal and gas-fired electricity provided by companies like Genesis and Contact Energy. Clean energy like wind, solar, and hydro have no fuel costs, so once built they are much cheaper to run.

This is such an economically illiterate argument it is hard to know where to start. It is basically saying if you ignore the cost of capital, then these energy types are cheapest.

It’s like saying that it is cheaper to have a $50 million robot make coffees than a barista as the barista is paid $25 an hour and the robot is not.

Sensible people look at the total cost of electricity generation which includes cost of capital, the discount rate, operating costs, fuel costs and maintenance. A key part of this is how long a plant can produce electricity for.

Here’s some costs from various countries.

France:

  • Hydro 20 euros/MWh
  • Nuclear 50
  • Gas 61
  • Wind 69
  • Solar 293

US:

  • Geothermal 48
  • Hydro 84
  • Nuclear 95
  • Coal 95
  • Gas 142
  • Wind 197
  • Solar 240

Each country is different. The key thing is that ignoring the cost of capital, as Greenpeace does, is nuts.

The Energy News Editor points out some other issues:

In the last week of January – the height of summer – coal and gas-fired plants were delivering about 30 per cent of our power.

They didn’t cause those high prices – that’s the cost of having plants that can run at short notice but sometimes don’t run for months at a time.  It’s the necessary insurance policy – in our already 80 per cent-plus renewable power system – for when the lakes are low or the wind isn’t blowing.

Renewables are great. In NZ we are blessed with good water and wind. But when you have no wind and no rain, you still need power. That is why backup supplies are always desirable.

As Transpower notes in its Te Mauri Hiko – Energy Futures report, the cost of renewables should continue falling, and they should be the cheapest long-term option for electrifying more of the economy.

But Transpower is also clear that the biggest challenge will be covering the potential winter and dry-year shortfall that will result from greater reliance on wind, hydro and solar. The potential deficit could triple by 2050, the national grid operator says.

I’m personally keen on more hydro, But everytime there is a proposal to dam a river somewhere to create a hydro power station, you can be sure Greenpeace and other groups end up opposing it.

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