Letting the market decide: Tom Blees responds to Eco-Business reader’s question

Tom Blees, president of The Science Council for Global Initiatives, has responded to an Eco-Business reader’s sustainability question as part of a joint question and answer initiative with the Global Energy Prize.

Question: the true costs of energy

There are several market externalities associated with energy that distort the true costs of each source of energy. Several countries are attempting to deal with this by offering differing tariffs for different sources of energy. This, however, leads to the inefficient outcome of having the governments attempting to pick winners and not letting the market decide which technology gets adopted. Might we not be better off with inputting the cleanup costs associated with each energy source and charging it to the generator? In that way, the cleaner sources will benefit and all energy will have a cost that reflects zero environmental impact. This would also let the powerful market mechanism decide the most efficient way to generate clean energy.

  • Mike M.

Response: learning the hard way

This would indeed be an excellent approach. NASA’s Dr. James Hansen, a leading expert on climate change, has urged governments to implement carbon taxes to reflect the true cost of fossil fuel use to society and the environment.

Unfortunately, many of those who claim to be most concerned about the environment—climate change in particular—push governments to implement feed-in tariffs to support the manufacture and deployment of wind and solar power systems, leading to staggering costs for demonstrably inefficient systems.

Lessons from Germany

An infamous example is Germany, which has committed about 75 billion Euros to solar power subsidization over the next 20 years. The data from a couple decades of solar deployment there would indicate that for this massive investment Germans can reasonably expect to obtain about 3% of their electricity needs from solar power, and only intermittently at that.

If building nuclear power plants in Germany would cost approximately double what it costs in the Far East (which it shouldn’t), that amount of money could construct modern, safe nuclear power plants capable of providing about 33 gigawatts of round-the-clock electricity. With the nuclear plants already in use in Germany, that would provide about 2/3 of the nation’s electricity demand. So: 66% dispatchable with 60-year life vs. 3% intermittent with ~25-year life, for the same money. Let the market decide? Good idea!

Tom Blees is a member of the international selection committee for Russia’s Global Energy Prize. He is the president of The Science Council for Global Initiatives and the author of Prescription for the Planet – The Painless Remedy For Our Energy & Environmental Crises.

Editor’s note: For a local example of inefficient subsidies, the Asia Pacific need look no further than Australia and its problematic solar feed-in tariff scheme. Read the article here: Home solar costs 25 times more than ETS to cut gas.

About the Global Energy Prize

The Global Energy Prize was established in 2002 by a group of Russian scientists, with the support of major energy corporations. This international award is granted for outstanding scientific achievements in the field of energy which have proved of benefit to the entire human race. Since its inception, the award has been granted to 22 scientists from Great Britain, Iceland, Canada, Russia, the USA, Ukraine, France, Germany and Japan. Awarded annually, the prize fund amounts to 30 million roubles (approximately $1m USD) and is divided among the Laureates. The President of the Russian Federation participates in the awards ceremony held in St Petersburg each year, which is accompanied by a Laureates’ Week celebrating the work of the winning scientists.

Learn more about the Global Energy Prize .

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