Environmental Engineering Reference
In-Depth Information
certain and sizeable, they are dif
cult to measure and are not considered further here
(though this does not mean that we deny them in any way).
There are several kinds of positive and negative externalities that are usually
mentioned when discussing the topic of renewable energy. The
rst positive
externality for renewables is undoubtedly related to the climate and the emission of
CO
2
and other polluting gasses. This is clearly relevant, and has become more so
since the last report of the Intergovernmental Panel on Climate Change ([
17
] with
an updating announced for 2014), and hardly anyone denies it. But the weight given
to it ranges from fairly low to considering it as one of the most relevant problems
facing human kind.
The second, highly relevant positive externality relates to macroeconomic per-
formance: renewables can bring green jobs, reduce the current account de
cit (or
improve it if it is already positive) and thus improve the security of the energy
supply. These advantages are, however, mainly applicable to countries where fossil
fuel and gas reserves are scarce and there is an unemployment problem, such as the
European Union at present (Spain is an outstanding case in point). But even for
countries with plenty of fossil fuel resources of one kind or another, renewables can
provide a useful way to diversify the economy and help avoid the threat of the so
called
'
'
[
4
]. This is precisely why many oil and gas-rich countries are
investing heavily in renewables and exporting their fossil resources (Saudi Arabia,
the United Arab Emirates, Brazil, Norway, Denmark, etc.). Finally, renewables are
suitable for distributed generation and consumption of power, and they can greatly
reduce the cost of heavy investments in networks and the losses incurred in
transporting energy from major supply facilities to large consumption sites (cities,
large factories, etc.).
The third and most easily identi
Dutch disease
able positive externality entailed by renewables
is a consequence of the fact that since variable costs are low in relation to
xed up-
front capital costs it is always more pro
table to operate plants and generate elec-
tricity than to disconnect them. This will necessarily bring down the electricity
market price, and that may have a very sizeable impact, especially on standard
marginalistic markets (i.e. it is the highest price that is brought down). This was
discussed quite early in the relevant literature in relation to wind energy deployment
in Denmark and Germany: it is called the
'
merit-order effect
'
[
11
]. This is the
justi
cation behind paying
'
feed-in tariffs
'
for renewables. In the end, even if the cost
of
'
feed-in tariffs
'
is added to the electricity price, the general result is that renew-
ables are bene
cial for consumers.
A fourth, frequently neglected positive externality derives precisely from the
relatively low variable costs of renewables, since with the exception of biomass no
fuel costs are incurred, in sharp contrast to fossil-fuel energies. One immediate
implication is that with the uncertainty surrounding the future supply of fossil fuels,
project costs are becoming much harder to assess, implying a considerable risk that
must be included in the capital cost required from investors.This extra cost is
avoided with renewable energies.
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