Monday, August 30, 2010

Costs, Benefits And Environmentally Friendly Energy

In my first lecture, I usually define what we mean by "rational" in economics. It means "no one intentionally makes themself worse off." Or, a rational act is one where "the benefit is greater than the cost." Of course, the benefit is in the eye of the beholder. If you go to a Radiohead concert, it might bring you alot more benefit than it would bring me. And costs and benefits are not always known. But this is more or less what rational means.

So we should be rational in our energy use. That is where the article Green Energy: Why We're Still Not Using It comes in. Here is an exerpt:

"The total cost to research, build and operate new green energy plants combined with storage and transmission expenses is significantly higher than traditional coal burning plants. According to the U.S. Energy Information Administration, the average cost of solar power is almost four times as much as traditional coal burning electric generation. The costs are difficult to compare due to the widely disparate nature of individual technologies but the net result is that startup costs are steep."

[wind power]"...is still 50% more expensive than coal-powered electrical plants. Offshore turbines are almost twice as expensive."
There could be some environmental benefits that would change the accounting. Those were not esitmated in the article. But those would have to be very high to tilt the balance toward some of these alternative fuels.

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