My attention was caught by a press release this week from the NZ Wind Energy Association (NZWEA) announcing the results of an Infometrics report they had commissioned on the likely economic effect for New Zealand of an increase in wind power by 2030 to the point that it supplied 20 per cent of the country’s electricity. The NZWEA considers this a realistic target. The report came up with some interesting figures. Compared with the more modest expectations of the Ministry of Economic Development that wind might supply 8 per cent of the electricity in 2030 there was clear economic benefit for the country in the 20 per cent figure.
The comparison was made under four different scenarios:
- Carbon is priced at $50 per tonne (the figure planned under the current Emissions Trading Scheme). The benefit emerges as $60 per person per year.
- Carbon is traded at $100 per tonne. The benefit increases to $90 per person.
- Carbon is at $50 per tonne but the natural gas price increases to $17/GJ (currently over $9/GJ). The benefit rises to $390 per person annually.
- 800,000 electric vehicles are added to the transport mix with carbon remaining at $50 per tonne. The benefit is $170 per person per year.
To provide a perspective for these projected benefits the report points to the current average electricity cost per person of about $400 per year.
Weak though our Emissions Trading scheme is it’s apparently good for this much:
The introduction of New Zealand’s Emissions Trading Scheme (ETS) has tipped the cost structure of electricity generation against thermal generation. While gas is placed in a more favourable position than coal, the main effect of the carbon price is to enhance the competitive position of renewables-based generation, particularly those types that were already competitive at the margin, such as geothermal and wind.
The report explains in broad outline the modelling methods used to obtain the results and delineates the scenarios in much more detail than the summary statements above. It’s an accessible read for the non-economist.
The shift to renewables cannot be subordinated to economic considerations: it is imperative that we stop burning fossil fuels. But the economic objections are in any case clearly overstated, springing as they do from the alarm of vested interests. This report is yet another demonstration that the change which must be made for environmental reasons is far from spelling economic ruin. It is also another exposure of the foolishness of the government’s policy of ’balancing’ environmental and economic interests, as if environmental responsibility is some kind of threat to economic welfare and needs to be held in check. If the low price assigned to carbon emissions by the current ETS in New Zealand is enough to make wind power competitive with fossil fuel power there is clearly no threat to the economy from the abandonment of coal and gas-powered electricity in future.
The price currently put on carbon does not, of course, come anywhere near representing the real costs greenhouse gas emissions lay on human societies in the present and the future. The price would by now have been considerably higher if we were honest, and the transfer to renewables would be in full swing. The NZWEA would be so busy coping with the expansion of the industry that there’d be no need to seek reports on its benefits to the economy. Or any reports that were done would be in comparison with other forms of renewable energy, not with an energy mix that includes ’cheap’ natural gas or coal. And the government would have firmly turned its back on the further exploitation of fossil fuel resources, recognising the wealth they appear to offer as a betrayal of humanity.